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China will be imposing tariffs on European brandy imported into the country, taking effect Friday, October 11, with import taxes ranging anywhere between 30.6% to 39%. The Morning Brief's Seana Smith and Brad Smith take a closer look at this decision — noting it to be a retaliation by Chinese officials for Europe's EV tariffs — and how it seems to already be impacting shares of luxury French liquor makers LVMH (MC.PA) and Pernod Ricard (RI.PA).
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This post was written by Luke Carberry Mogan.
European beverage makers taking a hit after China said it would impose tariffs on Brandy imported from the EU. Not to be confused with the 2090s R&B singer. The tariffs are set to take effect on Friday ranging from 30 to 39%. And this comes after the EU imposed tariffs on Chinese electric vehicles. So, you could sum this up as a tit for tat, essentially, but they're just seeing some of the moves from the European beverage makers, unfortunately, moving lower in reaction to this. Uh French President America, uh, not America, Emmanuel Macron, I was like merging them together like a, like a Brangelina almost. But French President Emmanuel Macron, uh, essentially calling this pure retaliation, um, even when they had started the investigation China had into some of uh, the Brandy operators and the Brandy probe that they had initiated as well.
Yeah. And I think that this was the exact fear from so many within the EU block when it comes down to the vote that we got uh, most recently on the tariffs on Chinese cars. There, there was a lot of talk just about what exactly this could set off in terms of a tit for tat, a tariff war, and it seems like at least this could be the start of that. And you could see the real impact on these stocks here this morning under pressure here in early trading. And you take into account some of that move here to the downside that you could see going forward, lots of questions about what ultimately this is going to do for pricing, obviously, the impact that it's going to have on consumers, what this means for demand down the road for so many of these companies. So again, a very, very pressing issue and important one to watch. And then also just when you drop some parallels to what's happened here in the US and you talk about some of that rhetoric from both candidates here for president from former President Trump and also Vice President Kamala Harris just talking about their plans with China and and very much both taking a hard stance. It seems like for China and their potential policy were their administration to be elected. So again, this could be a warning sign for, for maybe more of what is to come here. And we know we have seen plenty of a back and forth between the US and China here over the last several years.
Yeah, for anybody wondering if this is a big deal or not, I mean, kind of. All right. At the end of the day, like French and and the France specifically, their shipments to China totals around $1.7 billion at least it did in 2023 here. 99% of China's imports of the spirit here. So, uh, that is some of the context and why perhaps China targeted this specifically. Um, but then you think about how it compares even to what was already put on the table with regard to the tariffs for EVs. Now let's also keep in mind in the backdrop, there has been so much more of a mind share shift among the Chinese consumer to some of the homegrown options within the EV landscape, largely because there have been some amazingly lucrative subsidies that have been put on the table to spur demand within that market as well. So, um, yeah, there're going to be a couple people who are not going to be able to get the same type of happy hour drink for the same price in those regions. But, uh, at the end of the day, we'll see if there is any reversal of this tit for tat and uh, when people can expect the Brandy to cost just a little bit less in the region.
