Cognac producers prefer price deals over higher tariffs

China will start charging up to 34.9% in duties on EU brandy from July 5, 2025, but most of France’s leading cognac makers can avoid these fees if they agree to sell at certain minimum prices, the Commerce Ministry said Friday.

The ministry said the tariffs, which apply for five years, target mostly French cognac. Reuters said that in the final decision, officials set the highest duty rate but said it could change depending on the type and source of the brandy. The investigation took over a year to complete.

Despite the broad scope of the duties, the ministry said major producers such as Hennessy, Martell, Courvoisier, owned by LVMH, and Rémy Martin will be spared if they sell at or above undisclosed price thresholds. The ministry did not reveal the exact minimum prices required for exemption.

China began its anti-dumping investigation in January 2024, which most saw as payback for the EU’s steep tariffs on Chinese electric cars. French cognac makers together export around $3 billion of products each year. Many in the industry have argued they were caught up in a wider trade dispute.

Since provisional duties took effect in October 2024, distillers were required to pay security deposits that tied up millions in working capital. Smaller wineries, especially in France’s Charente region, faced serious cash-flow strains. Negotiators said the return of these deposits was a key issue in talks with Chinese officials.

Cognac producers prefer price deals over higher tariffs

Rémy Cointreau said in a statement that the agreement on minimum price commitments represented “a substantially less punitive alternative” and would support “the strengthening of some investments in China.” Pernod Ricard acknowledged it regretted the higher operating costs but noted that the new duties would cost far less than keeping the provisional tariffs in place permanently.

An EU spokesperson, however, called the decision unfair and unjustified.

This announcement comes as China’s foreign minister, Wang Yi, visits Europe to prepare for an EU-China summit later this month. He’s already been in Berlin and Brussels this week and will be in Paris on Friday, working to ease disputes over electric vehicle tariffs and China’s limits on rare-earth exports.

Last week, Reuters reported that French cognac houses have agreed on minimum import prices for China, but that final sign-off was conditional on progress in the EU-China electric-vehicle dispute.

Shares of French spirits companies moved in mixed fashion as investors weighed the ruling. Many welcomed the end of provisional duties in exchange for price guarantees, seeing it as a clearer ground for planning.

Cognac exports to China dropped by 70%

BNIC says monthly cognac exports to China have fallen by as much as 70% since the tariff fight began, showing how vital China is for French distillers.

On Friday, Rémy Cointreau’s stock rose 0.54%. Pernod Ricard fell 0.3% after recovering early losses, while LVMH slipped 1.5%.

Across the Atlantic, European spirits firms have faced sluggish sales in the United States, where inflation has driven consumers away from expensive spirits. Former President Donald Trump’s threats of tariffs on EU imports have added to their concerns.

Industry insiders said the new price-commitment deal could lead to slight increases on some spirits, but it was too soon to say whether those would reach store shelves. Even modest hikes can test retailer margins, they noted, but may also help protect distillers’ profits.

“The French government has raised this repeatedly with the Chinese authorities as a major bone of contention,” said a senior industry source, speaking on condition of anonymity due to the talks’ sensitivity. He said neither side wanted things to get out of hand. They wanted a resolution.

BNIC described the price-commitment deal as “less unfavourable” than anti-dumping duties but still worse than the situation before the probe began. The industry group urged the French government and European Commission to secure a political agreement with Beijing as soon as possible to lift all duties.

Your crypto news deserves attention - KEY Difference Wire puts you on 250+ top sites