In the ongoing China-EU trade dispute, China is tactically preparing for potential retaliation while maintaining a cautious stance. Following the EU’s July 4 imposition of provisional tariffs on Chinese electric vehicles, China has responded prudently, prioritizing negotiation while signaling readiness to counter if necessary. Initially, China has launched targeted investigations into EU brandy and pork imports. The Ministry of Commerce has initiated an anti-dumping probe into EU brandy, focusing on France, which accounts for 99.3% of China’s brandy imports.
However, potential tariffs on brandy are expected to have minimal impact on China’s alcohol market, which recently resumed imports from Australia after lifting tariffs imposed in 2021. Similarly, an anti-dumping investigation into EU pork imports is underway, targeting major suppliers like Spain, the Netherlands, Denmark, and France. Despite ample domestic supply and deflationary consumer prices, pork tariffs could strengthen China’s negotiating position. China, the world’s largest pork consumer, imported $6.9 billion worth of pork in 2023, with 47.9% coming from the EU.
Additionally, China has initiated a comprehensive investigation into EU trade practices and barriers affecting products like railway locomotives, photovoltaics, wind power, and security equipment. This probe, potentially lasting until mid-April 2025, reflects China’s response to earlier EU investigations into Chinese subsidies and market access. Citi believes China’s strategic patience indicates a preference for negotiation over escalation, aiming to avoid decoupling from global markets and supply chains. Beijing is likely to offer reasonable concessions in trade talks while remaining calibrated in its responses until disputes potentially escalate.
