China raises brandy tariffs as Wang Yi tours Europe amid trade and security disputes

China's top diplomat Wang Yi arrived in Europe this week for a tour that was meant to mark 50 years of diplomatic relations with the European Union. Instead, the visit has laid bare how far the relationship has deteriorated. On Friday, the same day Wang met officials in Brussels, China's Ministry of Commerce announced anti-dumping duties of up to 34.9 per cent on European brandy imports, effective immediately. The move targets France's cognac houses, Pernod Ricard, Rémy Cointreau and Hennessy among them, which have now agreed to sell their products in China at a predetermined minimum price to avoid paying the tariffs.

Brandy duties retaliate against EV tariffs

The brandy measures are widely seen as retaliation for the EU's decision last October to impose tariffs of up to 35 per cent on Chinese-made electric vehicles, citing unfair state subsidies. Beijing denied the allegations and opened investigations into European pork and dairy before turning to spirits. The dispute has reached the World Trade Organization, which is reviewing the EU's actions. For French producers, the stakes are high: China is the largest export market for cognac by value, absorbing roughly 200 million euros of shipments annually. The minimum pricing arrangement, which also takes effect on 5 July, allows the major houses to continue selling without the duty burden, but smaller producers may not enjoy the same terms.

French officials have been notably restrained in public. The Élysée has not issued a formal protest, and the cognac houses themselves negotiated the price floor directly with Chinese authorities. That pragmatism reflects a broader European dilemma: how to push back against Chinese trade practices without triggering a spiral that hurts exporters already contending with weak domestic demand and the threat of US tariffs.

Rare earths expose Europe's supply chain vulnerability

If brandy is a visible irritant, rare earths are a structural one. Since April, China has required export licences for seven categories of rare earth elements and related magnets, materials essential for electric vehicles, wind turbines, semiconductors and defence systems. China controls nearly two-thirds of global mining and 92 per cent of refining capacity. The restrictions, which Beijing describes as routine management of "dual-use goods" with civilian and military applications, have created immediate uncertainty for German manufacturers.

In Berlin, Foreign Minister Johann Wadephul criticised the measures as "unilateral and often not very transparent", warning that they damage China's reputation as a reliable partner. German industry associations have echoed the concern. The Federation of German Industries (BDI) has called for accelerated diversification, but building alternative supply chains takes years. Wang Yi offered a "green channel" to ease licensed exports to the EU, though details remain vague and the licensing regime itself stays in place.

Security accusations harden the political climate

Trade was not the only friction point. In Brussels, EU foreign policy chief Kaja Kallas delivered a blunt assessment: "Chinese companies are Moscow's lifeline to sustain its war against Ukraine," she said, adding that Beijing's actions "harm European security and jobs." Kallas cited cyberattacks, interference in democratic processes and unfair trade practices alongside the Russia connection. The EU has sanctioned several Chinese firms accused of supplying dual-use goods to Russia's military-industrial complex, but diplomats acknowledge the measures have not altered Beijing's strategic partnership with Moscow.

Wang rejected the accusations, insisting China is not supplying lethal weapons and portrays itself as a neutral party seeking peace. He warned against "confrontation" and urged a more pragmatic relationship, adding pointedly that "China is not the United States" and should not be treated as such. The line underscores Beijing's calculation: it wants Europe to maintain strategic autonomy from Washington, even as European capitals grow more alarmed by China's alignment with Russia.

The American deadline squeezing Germany

While Wang toured European capitals, the clock was ticking on a separate threat. President Donald Trump has set a 9 July deadline for a trade agreement with the EU; failure to reach a deal could see tariffs on European imports rise to 20 per cent or more. The United States is Germany's largest single export market, and the German economy is already fragile. Destatis reported that industrial orders fell 1.4 per cent in May compared with April, a sharper drop than analysts expected, after two years of recession.

Peter Leibinger, president of the BDI, warned that escalating US tariff policies could plunge Germany into a third consecutive year of recession and called for substantial reforms to restore competitiveness. French President Emmanuel Macron has pushed for an EU-US deal "as soon as possible, with the lowest tariffs possible," arguing for open markets rather than protectionism. EU trade chief Maros Sefcovic was in Washington for last-ditch talks, with Commission President Ursula von der Leyen declaring the bloc "ready for a deal." Yet the negotiating space is narrow: the US wants concessions on agriculture and industrial goods that the EU has long resisted, and the Trump administration's unpredictability makes any agreement fragile.

Anniversary summit at risk as tensions mount

The 50th anniversary of EU-China diplomatic relations was supposed to be celebrated at a summit in Beijing later this month. Reports now suggest China may cancel or scale back the event. The symbolism would be striking: half a century of engagement marked not by a joint declaration but by dueling tariff lists, export controls and security recriminations. European officials have not confirmed a cancellation, but the mood music has shifted. The EU's new "de-risking" vocabulary, reducing critical dependencies without full decoupling, has moved from concept to urgent practice, driven as much by China's own restrictions as by European policy.

How the disputes interlock

The three fronts, China trade, China security, US tariffs, are not independent. The EU's EV tariffs on China were partly motivated by a desire to protect a strategic industry that the bloc also hopes will reduce reliance on Chinese supply chains. China's rare earth restrictions demonstrate why that reliance is dangerous. The US tariff threat pushes Europe toward a transatlantic deal that could require aligning more closely with Washington's tougher line on China, including export controls on advanced semiconductors. Meanwhile, China's courtship of Europe as a counterweight to the US loses credibility when Beijing restricts critical minerals and backs Moscow.

European companies are caught in the middle. German carmakers face Chinese EV competition at home, Chinese retaliation risks in their largest growth market, and potential US tariffs on their American exports. French luxury groups see cognac targeted while their other Chinese revenues depend on consumer sentiment that can shift rapidly with political winds. The EU's trade defence instruments, anti-dumping, anti-subsidy, foreign subsidies regulation, are being tested in real time, and the results will shape whether the bloc can enforce fair competition without triggering a trade war it cannot afford.