Investing.com -- Shares of French spirits giants Remy Cointreau (EPA:RCOP) and Pernod Ricard (EPA:PERP) dropped on Tuesday following China's decision to impose temporary anti-dumping measures on European brandy imports, as per a Reuters news report.
At 5:15 am (0915 GMT), Remy Cointreau and Pernod Ricard was trading lower at 8.3% and 4.1%, respectively.
The move came in response to the European Union's recent approval of tariffs on Chinese-made electric vehicles (EVs).
China's Ministry of Commerce announced that an investigation had preliminarily found that EU-sourced brandy was being sold at below-market prices, threatening harm to China's domestic brandy industry.
As a result, starting October 11, importers of European brandy will be required to pay security deposits ranging between 34.8% and 39.0% of the import value, the report added.
Remy Martin and Hennessy, two of France’s leading cognac brands, were hit particularly hard, with deposit rates of 38.1% and 39.0%, respectively.
Importers of Martell brandy, which cooperated with the Chinese investigation, faced a slightly lower deposit rate of 30.6%.
The tariffs appeared to target France specifically, given its prominent role in supporting the EU's tariffs on Chinese EVs and the fact that French exports made up 99% of China's brandy imports last year, valued at $1.7 billion.
The impact on French spirits companies was immediate. Shares of Remy Cointreau fell by 5%, while Pernod Ricard dropped 2.9%. LVMH (EPA:LVMH), the parent company of Hennessy, also saw a 4% decline in its stock.
The new deposits will increase upfront costs for EU brandy importers, though it remains unclear how or when importers might recover these funds. China's Ministry of Commerce did not provide further details on the matter.
These measures followed the EU’s vote to impose tariffs on Chinese EVs, with rates ranging from 7.8% for Tesla (NASDAQ:TSLA) to 35.3% for Chinese automakers like SAIC that did not cooperate with the EU's investigation, the report added.
Despite this, the European Commission has indicated it remains open to negotiating alternatives even after the tariffs come into effect.
In addition to the anti-dumping measures on brandy, China is also conducting ongoing investigations into EU pork products and considering higher tariffs on large-engine vehicles, which could have a significant impact on German automakers, whose exports of vehicles with engines of 2.5 liters or larger to China totaled $1.2 billion last year.