French cognac producers have proposed minimum import prices ranging from $20 to $300 per liter to counter China’s 39% tariffs and steer trade negotiations toward a resolution.
In response to the threat of 39% tariffs imposed by China, leading French cognac producers have proposed minimum import prices for this luxury spirit into the Chinese market, ranging from $20 to $300 per liter. This initiative forms part of complex trade negotiations between the two countries aimed at preventing tariff escalation and resolving disputes stemming from anti-dumping investigations.
-
Background and Significance of the Minimum Price Proposal
French cognac producers, renowned globally for their luxury and quality, have recently submitted a significant proposal to establish minimum import prices for cognac entering China. The primary goal of this initiative is to prevent the imposition of damaging tariffs as high as 39%, which could severely affect the substantial Chinese market. This proposal is part of intense negotiations between French producers and China’s Ministry of Commerce and represents a strategic effort to resolve ongoing trade tensions.
-
Escalating Trade Tensions Between France and China
Since January 2024, the Chinese government has launched an investigation into potential anti-dumping practices related to French cognac imports, which culminated in the threat of tariffs up to 39%. This move took place amid broader trade frictions between the European Union and China, particularly following the EU’s imposition of tariffs on Chinese electric vehicles. China’s retaliatory measures, including the anti-dumping probe on French cognac, have caused significant concern among industry stakeholders, as China is the second-largest market for cognac after the United States.
-
Details of the Proposed Minimum Prices
According to an official document prepared by a Paris-based law firm representing the cognac producers, the proposed minimum import prices are structured according to the aging period and quality of the spirit. For example, “Very Special” (VS) cognacs, aged for two years, are proposed to have a minimum import price of 144.70 yuan (approximately $20.16) per liter. “Very Superior Old Pale” (VSOP) cognacs, aged for at least four years, are priced at 177.92 yuan. Higher-end categories, such as “Extra Old” (XO) and “Extra Extra Old” (XXO), are priced at 526.52 yuan and 2,126.07 yuan (about $296.16) per liter respectively. These prices represent the minimum import thresholds, with distributors and retailers charging additional markups downstream.
-
Negotiation Efforts and Progress
Over recent months, multiple political and technical meetings have been held in Paris and Beijing involving cognac industry representatives and Chinese officials. These discussions aim to safeguard the position of French cognac in the Chinese market while seeking a resolution to the tariff dispute and anti-dumping investigation. Despite intensive talks, no final agreement has yet been reached, and time is running short with China’s deadline to conclude the investigation set for July 5.
-
Strategic Importance of the Chinese Market for French Cognac
China is the world’s second-largest consumer of cognac after the U.S., making it a vital market for French producers. The rising demand for luxury beverages in China over recent years has created vast growth opportunities. However, recent tariff impositions and trade restrictions have posed considerable challenges for producers. As traditional markets face economic pressures and changing consumer preferences, maintaining access to the Chinese market is critical for the long-term sustainability of the French cognac industry.
-
Outlook and Potential Implications
The introduction of proposed minimum import prices could represent a key step toward easing trade tensions between France and China and paving the way for a sustainable export framework for cognac. This strategy not only helps preserve the standing of French cognac but also mitigates the risk of severe tariffs that could significantly damage the industry. Nonetheless, the ultimate outcome depends on China’s forthcoming decision ahead of the July deadline, which will determine the future trajectory of this sector and bilateral trade relations. Should an agreement be reached, it is expected to enhance export conditions and foster greater stability in commercial ties between the two nations.
