China approaches the EU with EV price-cap proposals amid possible thaw in trade feud

There could be a de-escalation of the ongoing EU-China dispute, as Politico Morning Trade  reports that China has demonstrated a willingness to make concessions on Electric Vehicle (EV) pricing to avoid provisional tariffs imposed the European Commission (EC).

This follows China’s decision yesterday (29 August) not to impose tariffs on French brandy imports. The FT reports that this is despite an anti-dumping investigation finding that European firms were dumping their products and posing a “substantial threat to the domestic brandy industry”.

EV negotiations?

Politico reports that five proposals have been submitted by different Chinese stakeholders to prevent the imposition of provisional tariffs outlined last week. These offers centre on fixed minimum prices per unit that pose less of a threat to the EU’s domestic market.

Sources close to discussions suggest that one group, the China Chamber of Commerce for Import and Export of Machinery and Electronic Products, has gone further than price controls and has even proposed a volume cap on the number of EV exports.

Brandy concession

China’s conciliatory approach to EVs appears to have extended to alcohol, as its anti-dumping investigation into French brandy concluded yesterday by deciding not to impose tariffs on French cognac producers.

However, this is despite findings from Beijing’s commerce ministry that producers had been dumping brandy into the Chinese market, leaving the door open for tariffs to be imposed at a later date.

The investigation, opened in January, came three months after the EU began its probe into Chinese EVs.

Share boost

The markets initially reacted warmly to the news, with two of France’s largest producers experiencing double-digit share price jumps. Remy and Penrod rose 12% and 10% respectively, before settling at an increase of 5.3% and 3.3% today (30 August).

Reuters reports that several other European industries caught in the crosshairs of trade disputes also received a similar share-price boost, including other European alcohol producers like Campari and Diageo.

Short-lived relief

Analysts still expressed concerns that tariffs could be imposed at some point in the future. China’s findings – that European distillers are selling brandy at a margin of 30.6%-39.0% – could translate into tariffs that would see an additional price mark-up of 16% for Penrod and 20% for Remy, suggested Citi.

The bank told Reuters that many investors were expecting “around a 50% incremental cognac tariff rate” and that share prices are now continuing to fall after Thursday’s spike.

European industry body SpiritsEurope also said they were “very disappointed” with the investigation’s outcome.

Tariff threat

While the brandy dispute has reached an uneasy conclusion, China still has several ongoing investigations.

In June, it opened a subsidy investigation into pork from Spain, Denmark and the Netherlands, while just last week, it launched a probe into support for the dairy industry across eight EU countries in response to the EU’s publication of its provisional tariffs on Chinese automakers.