By Euronews with AP
Published on
China will impose up to 42.7% of provisional tariffs on dairy products including milk and cheese imported from the European Union, its Commerce Ministry said Monday.
The elevated duties, which take effect Tuesday, were based on preliminary results from an investigation opened by China’s Commerce Ministry as tensions between Beijing and Brussels flared.
Beijing reviewed subsidies provided by EU countries for dairy and other farm products as a tit-for-tat measure after Brussels investigated Chinese subsidies for electric vehicles and later imposed tariffs as high as 45.3% on China-made EVs.
EU subsidies undercut Chinese dairy prices?
China’s decision to apply graduated tariff rates is rooted in its trade-remedy investigation framework, which mirrors practices used by the EU, the United States and other major economies.
They were investigating whether EU dairy producers benefited from state subsidies that harmed China’s domestic dairy industry — specifically, whether those subsidies allowed European exporters to sell dairy products in China at prices that undercut local producers.
China’s commerce ministry opened an anti-subsidy investigation in August 2024 into imports of EU dairy products, including milk, cheese and cream.
The probe examined financial support under the EU’s Common Agricultural Policy, as well as additional subsidies from individual EU member states, including direct payments, price support, and other aid to farmers.
Chinese authorities assessed whether those subsidies caused “material injury” to China’s dairy sector by lowering prices, increasing EU market share or suppressing the profitability of domestic producers.
Based on its preliminary findings, Beijing concluded that EU subsidies had distorted competition in the Chinese market, leading it to impose provisional countervailing duties — with higher rates applied to companies that did not cooperate with the investigation.
Cooperate with the investigation, or face tariffs
Under these rules, companies that cooperate with an investigation — by submitting detailed cost data, responding to questionnaires and allowing verification — are typically rewarded with lower duties, while firms that refuse to cooperate or provide incomplete information are hit with the highest punitive rates.
In this case, China’s commerce ministry said EU dairy producers that cooperated were assigned a 28.6% tariff, reflecting what authorities deemed a verified level of subsidisation and injury.
Companies that did not cooperate were subject to the maximum rate of 42.7%, a default penalty designed to discourage non-participation and prevent firms from benefiting from a lack of transparency.
Such tiered tariff systems are common in anti-subsidy and anti-dumping cases and are often criticised by trading partners as coercive, particularly when investigations are launched amid broader political or trade disputes — as is the case with the EU–China standoff over electric vehicles.
China had initiated other probes into European brandy and pork imports as countermeasures for the EU’s tariffs on Chinese EVs. Last week, Beijing announced it was imposing up to 19.8% tariffs on EU pork imports — significantly lower than preliminary tariffs of up to 62.4%.
It accused the EU of dumping pork and pig by-products in the country, selling them at cheap prices which in turn harmed its domestic pork industry.
Tariff tit-for-tat
The European Commission, which manages trade talks and issues on behalf of the 27 EU member states, expressed concern over the tariffs.
“The commission’s assessment is that the investigation is based on questionable allegations and insufficient evidence, and that the measures are therefore unjustified and unwarranted,” spokesperson Olof Gill said.
Gill told reporters that the commission is examining the reasoning behind the move and intends to provide comments to the Chinese authorities.
China’s relationship with the EU is fractious, with the Chinese trade surplus with the EU recently coming into the spotlight. The EU runs a significant trade deficit with China, at more than €300 billion last year.
In July, Beijing also announced up to 34.9% tariffs on brandy imported from the EU — including cognac from France — although several major brandy brands had received exemptions.
Gill said the EU remains committed to good trade and investment ties with China.
“But in order for that to meaningfully happen, there is a list of issues and concerns that the European Union has had going back many months and even years that we would require China to address, in terms of overcapacity, in terms of unfair use of trade instruments, in terms of trade deficit, and so on,” he said.