China Sets Five Years of EU Brandy Duties, With Minimum Price Exemptions for Major Cognac Makers

Duties begin July 5, with a pricing deal for leading exporters

China will impose duties of between 27.7% and 34.9% on brandy imported from the European Union for five years starting July 5, 2025, following a final ruling by its Ministry of Commerce. Major French cognac producers will be exempt if they comply with agreements to sell at or above minimum prices, giving them some relief while leaving other exporters facing substantial additional costs.

The ruling covers brandy produced in the EU and shipped in containers holding less than 200 liters. The investigation examined imports from October 1, 2022, to September 30, 2023, and concluded that European brandy was being sold in China at unfairly low prices, threatening the domestic brandy industry. The ministry found dumping margins ranging from 27.7% to 34.9%, with some of the best known cognac brands assigned the highest rates.

French cognac is at the center of the dispute because it dominates EU brandy exports to China. China is the world's largest cognac market by value, taking approximately €1.4 billion ($1.6 billion) in annual exports from France. Hennessy, owned by LVMH, Rémy Martin, owned by Rémy Cointreau, and Martell, owned by Pernod Ricard, are among the brands affected.

The decision arrives amid wider disagreements between Beijing and Brussels over electric vehicles, agricultural goods, subsidies and access to markets. For exporters, the immediate issue is practical: companies covered by the pricing agreements can continue selling without the additional duties, while those outside the arrangement face a much more expensive route into a major market.

The exemption also comes with a constraint. Participating producers must respect the agreed minimum prices, so access to China will remain less flexible than it was before the investigation.

Why China found unfair pricing

China opened the investigation in January 2024 following a request from its domestic spirits industry. Chinese producers argued that European brandy was being sold below fair market value and was undermining their businesses.

Dumping, in trade terminology, means exporting a product at a price below the price charged in its home market or below its production cost. Such pricing can help an exporter gain market share or drive out competitors. Governments use anti-dumping duties to protect domestic industries against that practice by adding a charge to the imported goods.

The Ministry of Commerce said its investigation found a clear causal relationship between the dumping of EU brandy and the threat of material injury to China's domestic brandy sector. In plain terms, the ministry concluded that the imported products' pricing threatened serious harm to local producers.

Chinese officials said the investigation followed Chinese law and international trade rules, including those of the World Trade Organization (WTO). The ministry presented the decision as a measure to maintain market order and protect the legitimate interests of Chinese enterprises.

The European Commission disputes that justification. Its trade spokesperson, Olof Gill, described the duties as inconsistent with international trade rules. The disagreement therefore concerns both the commercial effect on European producers and whether China's action is justified under the rules governing trade.

How the dispute reached this point

The investigation and negotiations stretched across several periods before the July 4 announcement. The dates matter because the period examined for evidence came before the investigation itself, while the final duties begin on July 5.

• October 1, 2022, to September 30, 2023: The import period examined in China's brandy investigation.
• January 2024: China launched the investigation after a request from its domestic spirits industry.
• Late 2024: Preliminary duties were announced, followed by a steep decline in monthly cognac exports to China.
• Early July 2025: Chinese Foreign Minister Wang Yi visited Europe for meetings with French President Emmanuel Macron and other EU leaders, with trade among the main issues.
• July 4, 2025: China announced the final ruling and exemptions tied to minimum price commitments.
• July 5, 2025: The duties of between 27.7% and 34.9% take effect for five years.

Diplomatic contacts have continued alongside the trade measures. Both sides have welcomed steps toward resolving individual disputes, including the brandy case, while acknowledging that major issues remain unresolved.

What the minimum price agreements change

Pernod Ricard, Rémy Cointreau and LVMH's Hennessy agreed to minimum price commitments accepted by China's Ministry of Commerce. These agreements, known as price undertakings, allow the participating exporters to avoid the anti-dumping duties as long as they comply with the pricing terms.

A price undertaking addresses the importing country's concern through the export price rather than through an additional tariff. The exporter promises to sell at or above a specified minimum, and the importing country exempts compliant sales from the anti-dumping charge. Such agreements are a common feature of international disputes over dumping.

For the leading cognac houses, the arrangement preserves access to China without the full tariff burden. It also gives them a basis for continued investment and planning in a market that is central to their business. The compromise allows Beijing to maintain its position on unfair pricing while accepting a negotiated way for participating companies to keep trading.

The minimum prices have not been publicly disclosed, so the size of the required adjustment and its effect on retail prices remain uncertain. Exporters will have less room to compete by lowering prices, and sales volumes could suffer if Chinese consumers choose alternative products.

Companies that did not sign a price commitment remain subject to the duties. Participating exporters that fail to comply with their agreements will also face the charges, which range from 27.7% to 34.9%.

The result is a system with two different routes into China: selling under an accepted minimum price agreement, or selling with the additional duty. The first route offers more favorable trading conditions, but it still changes how companies can price their products.

Smaller producers face a harder choice

Smaller EU brandy producers outside the agreements face the sharpest immediate pressure. The duties add a substantial barrier to entering or remaining in the Chinese market, which has become increasingly important to European spirits exporters. For some producers, the extra cost could make their products too expensive to compete.

Major brands have secured a way to continue trading without the duties, while producers excluded from that framework have fewer options. Industry groups argue that this creates an uneven playing field within the EU spirits sector and have called for the exemption arrangement to reach more exporters.

SpiritsEUROPE, the trade group representing EU spirits producers, expressed deep regret over the ruling and warned that the measures would create a substantial barrier to legitimate trade. It urged Chinese authorities to extend the price commitment option to all eligible exporters, rather than limiting relief to the largest brands.

The group also connected the brandy decision to the wider relationship between China and the EU. Explaining its concern about the risk of further trade friction, SpiritsEUROPE said:

Beyond its direct impact on our sector, this decision risks fuelling trade tensions at a time when mutual cooperation is more important than ever.

The inclusion of more exporters remains one of the unresolved issues in the negotiations. For smaller businesses, a broader agreement would determine whether they could sell under minimum price terms instead of paying the full additional duty.

Cognac makers welcome relief but seek normal trade

Florent Morillon, president of the French cognac producers' association BNIC, welcomed the pricing arrangement as a less damaging outcome than the duties. Describing the alternative available to participating exporters, he called it:

a substantially less punitive alternative

Morillon nevertheless said access to the Chinese market would remain impaired compared with conditions before the investigation. BNIC called on the French government and the European Commission to keep negotiating with China to restore normal trading conditions.

Rémy Cointreau, the owner of Rémy Martin, gave a similar assessment of the agreement. Comparing the minimum price arrangement with the tariff outcome, the company described it as:

a significantly more favorable outcome, or at the very least, a substantially less punitive alternative

Pernod Ricard, which owns Martell, expressed regret over the increased cost of doing business in China. It nevertheless acknowledged that the new trading conditions were preferable to facing the full duties.

The companies' responses show why the exemptions bring relief without restoring the previous position. Avoiding a tariff protects access to an essential market, but minimum prices still restrict commercial choices and may make it harder to sustain sales.

Exports and shares show the commercial pressure

Monthly cognac exports to China have fallen by as much as 70% since preliminary duties were announced in late 2024, according to industry data. That decline shows how heavily the dispute has already weighed on trade before the final measures take effect.

French spirits companies initially saw their share prices fall when the duties were announced. Their losses narrowed after confirmation that leading brands would be exempt under the price commitment scheme, reflecting a less severe outcome for companies covered by the deal.

Rémy Cointreau shares erased an early decline and ended up 0.54% on the day of the announcement. Pernod Ricard and LVMH also saw their losses narrow after the exemptions were confirmed.

The pricing commitments are expected to lead to some increases for consumers. For the major cognac houses, higher required prices may protect them from tariffs while reducing their ability to attract buyers through discounts. Competition from alternative products could then affect the volume they sell.

China's domestic brandy industry is intended to benefit from a protective buffer against foreign competition. The duties could help local producers gain market share, but their ability to do so depends on meeting consumer demand for quality, especially in the premium segment dominated by French cognac.

The commercial effect therefore reaches beyond the exporters themselves. Chinese consumers may encounter different prices or make different purchasing choices, while domestic producers have an opportunity to compete for business that has long gone to European brands.

Brandy sits alongside the electric vehicle dispute

The EU previously imposed tariffs of up to 45% on electric vehicles made in China, citing unfair subsidies that allegedly undercut European manufacturers. China launched investigations into European brandy, pork and dairy products against that wider backdrop of trade friction.

Industry observers have interpreted those investigations as retaliatory measures. China's stated justification for the brandy ruling remains the protection of its domestic industry from dumping. The political setting helps explain why a dispute over one category of spirits has become part of a much larger negotiation.

Both sides accuse the other of unfair practices across sectors ranging from electric vehicles to agricultural products. The broader relationship also includes a trade deficit estimated at $357.1 billion in China's favor, alongside disagreements over market access, subsidies and regulatory standards.

The electric vehicle and brandy cases involve different trade concerns. The EU's vehicle action focuses on subsidies, meaning financial support alleged to give producers an unfair advantage. China's brandy action focuses on export pricing. Both measures nevertheless make traded goods more expensive and place pressure on businesses seeking access to the other market.

Beijing and Brussels have expressed a desire to settle their disputes through dialogue. Progress has been slow, and the agreement covering major cognac producers leaves the wider disagreements intact.

Diplomacy continues, with wider issues unresolved

European Commission trade spokesperson Olof Gill rejected the brandy duties. Setting out the Commission's position, he called them:

unfair and unjustified

The European response combines opposition to the ruling with efforts to secure better conditions for exporters. Industry groups want the price undertaking framework opened more broadly, while BNIC is seeking the restoration of normal trade rather than a permanent adjustment to restricted access.

A spokesperson for China's Ministry of Commerce said accepting price undertakings demonstrated China's sincerity in finding practical solutions through dialogue and consultation. Calling for further communication to address trade differences, the spokesperson urged the EU to:

meet China halfway

Wang Yi's early July visit to Europe, including meetings with Emmanuel Macron and other EU leaders, placed the dispute within ongoing diplomatic contacts. Trade was high on the agenda, and both sides have praised movement on specific disagreements while recognizing that major issues remain unresolved.

China and the EU are also scheduled to hold a summit marking the 50th anniversary of diplomatic ties. Beijing may shorten that summit in response to the continuing tensions, underlining how fragile the relationship remains even as negotiations produce limited agreements.

The brandy arrangement could provide a model for handling other trade disputes, including those involving electric vehicles and agricultural products. Price undertakings offer a negotiated middle ground between unrestricted trade and additional duties. Their reach in this case is still limited by the exclusion of some exporters and by the wider disagreements over subsidies, market access and regulatory standards.

The Bottom Line

• China's final ruling sets duties of 27.7% to 34.9% on EU brandy in containers holding less than 200 liters for five years from July 5, 2025.
• The Ministry of Commerce concluded that dumping threatened material injury to China's domestic brandy industry. The European Commission disputes the duties and their consistency with international trade rules.
• Hennessy, Rémy Martin and Martell are among the major cognac brands covered by minimum price agreements that exempt compliant exports from the duties.
• Exporters outside the agreements, and those that breach their terms, face the additional charges. Industry groups want the pricing option extended to all eligible exporters.
• China takes approximately €1.4 billion ($1.6 billion) in annual cognac exports from France. Monthly exports have fallen by as much as 70% since preliminary duties were announced in late 2024.
• The exemptions brought some relief to French spirits companies and their share prices, but producers still face pricing restrictions and higher costs.
• The dispute forms part of wider China and EU trade tensions involving electric vehicles, pork and dairy products, with diplomacy continuing ahead of a summit marking 50 years of relations.