Cognac industry proposes minimum import prices to avert Chinese tariffs

France’s top Cognac producers are offering to set minimum export prices in a bid to halt steep Chinese tariffs due next month. The move comes amid rising trade tensions linked to EU tariffs on Chinese electric vehicles. The Cognac industry is attempting to reach its own agreement with China by suggesting producers will agree to minimum import prices to be paid by their shippers and agents. Reuters reports that it has seen a document which says the companies, led by LVMH, Pernod Ricard and Rémy Cointreau, will charge between US$20 and US$300 per litre depending on age in a bid to end the threat of tariffs of up to 39% which Beijing intends to impose from early next month.

Tariff retaliation linked to EV dispute

Cognac has been targeted by the Chinese in retaliation for EU tariffs of 50% on electric cars and components from the People’s Republic. By the end of February, the Cognac companies reckoned the sanctions were costing them €50m in lost revenues from their most valuable export market. They are also struggling from a lack of demand in the US, coupled with threats of 50% tariffs from President Donald Trump. Neither side has denied that the offer of minimum import prices has been made, but after a series of discussions last week, Beijing revealed that a “voluntary price pledge” had been on the table and that it was reviewing the terms as its deadline of July 5 for imposing tariffs approached.

Industry sources suggest deal imminent

Separately, Le Figaro has reported that Gabriel Picard, the head of FEVS, the French wine and spirits export lobby body, has said that “in principle” a minimum export price pact had been agreed. He said, “The recent phone calls between President Macron and Xi Jinping [China’s leader] have helped here.” But he refused to say more. Reuters says the list it has seen contains a sliding scale of minimum import prices based on the quality and age of the spirit.

Mixed reactions to proposed terms

Since what is termed the “opening offer” was made to Beijing, there have been further negotiations, and one source told the news agency a deal was close. Another, however, said the French were being pushed into a poor agreement. One analyst showed that the proposed figures suggested that the minimum prices in the initial offer were only marginally above those existing to importers before the Chinese restrictions, including the effective closure of the travel retail market, were introduced.