UPDATE 5-China spares major cognac makers from EU brandy dumping duties

China spared major cognac producers Pernod Ricard, LVMH and Remy Cointreau from hefty duties on EU brandy on Friday, a rare bright spot at a time of trade tensions between Brussels and Beijing as the two sides row over tariffs on Chinese-made EVs. China will from Saturday levy duties of up to 34.9% for five years on brandy originating in the European Union, most of it cognac from France, the Chinese Commerce Ministry said in a final ruling.

But most of France's cognac industry including big brands LVMH-owned Hennessy and Remy Martin will be exempt from the duties provided they sell at a minimum price, the ministry said in a statement. It did not disclose the minimum prices. Beijing launched its anti-dumping probe on EU brandy in January last year, in what was widely viewed as retaliation for the EU's decision to impose big import tariffs on China-made EVs.

French cognac makers generate global exports of $3 billion a year combined. With premium aged bottles of the liquor selling for hundreds of dollars, they have complained they are collateral damage in the broader trade row between Brussels and Beijing. In addition to the reprieve, China's commerce ministry will also give back deposits made by brandymakers since October 2024, when provisional duties were imposed. The refund issue, which weighed particularly heavily on smaller producers, was one of the sticking points in months-long negotiations, two industry sources said.

China is the world's biggest market for cognac in value terms. Remy Martin-owner Remy Cointreau said in a statement that the deal on minimum price commitments constituted "a substantially less punitive alternative" thus enabling "the strengthening of some investments in China."

Pernod Ricard said it regrets the increase in the cost of operating in China but additional costs are significantly less than would be the case if tariffs had been made permanent. LVMH and Campari did not immediately respond to requests for comment.

There was little sign that the rift between China and the EU was easing. Olof Gill, the European Commission's spokesperson for trade, said the tariffs were unfair and unjustified.

China's foreign minister Wang Yi is visiting Europe this week seeking to lay the groundwork for a summit between EU and Chinese leaders later this month, with the EV dispute and China's curbs on the export of rare earths high on the agenda. Wang was due to meet his French counterpart in Paris later on Friday.

Asked about media reports that China was poised to shorten the summit to a single day instead of two, a European Commission spokesperson said the programme was still being finalised. "Nothing has been cancelled because nothing has been announced and no final programme has been agreed yet," the spokesperson added.

Last week, Reuters reported that French cognac makers had reached a tentative deal on minimum import prices for the Chinese market, but that China would only finalise the deal if progress was made regarding EU tariffs on Chinese-made EVs. INVESTOR RELIEF

Shares of French spirits makers were mixed as investors digested the ruling, with many relieved Beijing had agreed to drop tariffs in return for price commitments, likely reviving sales which have suffered due to the tariffs. Remy Cointreau shares were up 0.54% and Pernod was down 0.3%, having regained some ground lost earlier in the day. LVMH was down 1.5%.

Monthly cognac exports to China have fallen by as much as 70% due to the trade dispute, according to data from the Bureau National Interprofessionnel du Cognac (BNIC), a French cognac industry group. Citi analysts said they expected upgrades to earnings forecasts for Pernod and Remy.

Remy, which makes 70% of its sales from cognac, mostly in the U.S. and China, said it would update its annual guidance when it releases quarterly numbers on July 25. European spirits makers have also been grappling with a downturn in sales in the United States where inflation has deterred drinkers from pricier spirits. President Donald Trump has also threatened tariffs on imports from the EU.

The minimum price pledges could translate into some price increases, but they will likely be small and it is too early to tell whether there could be an impact on shelf prices, a senior industry source with knowledge of the China negotiations said. "The French government has been raising this repeatedly with the Chinese government and saying this is a major bone of contention," said a senior French industry source with knowledge of the China negotiations, who declined to be named because of the sensitivity of the matter.

"I think both sides, France and China, did not want this to get out of hand, they wanted to find a resolution." BNIC said that the deal for minimum price commitments will be "less unfavourable" than anti-dumping duties, but still worse for its members than the historical pre-investigation norm.

"This is why we renew our call to the French government and the European Commission to reach a political agreement with the Chinese authorities as soon as possible to return to a situation without anti-dumping duties," BNIC said in a statement.

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)