Decline in Shares of French Spirits Due to China's Import Measures

Shares of French spirits giants Remy Cointreau and Pernod Ricard dropped on Tuesday following China's decision to impose temporary anti-dumping measures on European brandy imports, as reported by Reuters.

At 5:15 am (0915 GMT), Remy Cointreau and Pernod Ricard were trading lower by 8.3% and 4.1%, respectively.

The actions were in response to the European Union's recent approval of tariffs on Chinese-made electric vehicles (EVs).

China's Ministry of Commerce announced that an investigation had preliminarily found that EU-sourced brandy was being sold at below-market prices, threatening harm to China's domestic brandy industry. As a result, starting October 11, importers of European brandy will be required to pay security deposits ranging from 34.8% to 39.0% of the import value.

Notably, Remy Martin and Hennessy, two leading French cognac brands, were particularly affected, facing deposit rates of 38.1% and 39.0%, respectively. Importers of Martell brandy, which cooperated with the Chinese investigation, faced a slightly lower deposit rate of 30.6%.

The tariffs appear to specifically target France due to its significant role in supporting the EU's tariffs on Chinese EVs. Last year, French exports accounted for 99% of China's brandy imports, valued at $1.7 billion.

The impact was immediate: Remy Cointreau's shares fell by 5%, while Pernod Ricard dropped by 2.9%. LVMH, the parent company of Hennessy, also saw a decline of 4% in stock.

These new deposits will increase upfront costs for EU brandy importers, raising concerns over when or if importers can recover these funds. Further details were not provided by China's Ministry of Commerce.

These measures followed the EU’s vote to impose tariffs on Chinese EVs, with rates ranging from 7.8% for Tesla to 35.3% for certain Chinese automakers that did not cooperate with the investigation.

Despite these developments, the European Commission has indicated openness to negotiating alternatives even after the tariffs go into effect.

In addition to brandy, China is also investigating EU pork products and contemplating higher tariffs on large-engine vehicles, which could significantly impact German automakers, whose 2.5-liter+ engine vehicle exports to China totaled $1.2 billion last year.