China takes swing at European Union with brandy duties after EV tariff vote

China will start to impose provisional anti-dumping measures on brandy products imported from the European Union this week, a notice from the Ministry of Commerce showed Tuesday, days after the bloc voted to press ahead with tariffs on China-made electric vehicles.

Chinese customs officials will collect security deposits from companies that sell brandy originating from the bloc beginning this Friday. The deposit amount would be between 30.6% to 39% of the total value, the notice said.

The decision reversed a preliminary ruling in late August, when China said it would not impose any anti-dumping measures, despite concluding that European distillers had been selling brandy in China at a 30.6% to 39% margin.

"The relevant brandy industry within China has been substantially damaged or threatened," the statement read.

Tuesday's move came after the European Union voted on Friday to adopt definitive tariffs of up to 45% on China-made electric vehicles. The additional tariff, which could be as high as 35%, would come on top of the existing 10% rate.

China is "strongly dissatisfied" with the EU's adoption of the anti-subsidy duties on Chinese electric vehicles, a spokesperson for the Chinese Ministry of Commerce said in a statement on Friday, calling it a protectionist act that's "unfair, non-compliant and unreasonable."

China launched the anti-dumping investigation on brandy imported from the European Union in January.

The measures come amid a downturn in Chinese imports of cognac and brandy, with August volumes down 40% year-on-year, according to UBS' "spirit tracker."

The European Commission said it will challenge Beijing's provisional imposition of measures at the level of the World Trade Organization.

"We believe that these measures are unfounded, and we are determined to defend EU industry against the abuse of trade defence instruments," said the European Commission's Olof Gill, spokesperson for trade and agriculture, in an emailed statement.

Beijing's Tuesday announcement "seems to be a retaliatory measure following the (EU) Commission's investigation into electric vehicles," French Trade Minister Sophie Primas said, according to Reuters.

"Such a retaliatory measure would be unacceptable, and in total contradiction with international trade rules," she added, noting that France will collaborate with the European Union to protest against the Chinese decision.

The latest measure from Beijing weighed on the stock of European spirit-makers, with shares of Pernod Ricard down 3.69% at 11:58 a.m. London time, while Remy Cointreau shed 8.34%. Luxury conglomerate LVMH — which produces high-end cognac through its Moet Hennessy brand — was 3.57% lower.

— CNBC's Ganesh Rao contributed to this report.