China hits EU dairy products with provisional duties up to 42.7%

BEIJING - China will impose provisional duties of up to 42.7 per cent on certain dairy products imported from the EU after concluding the first phase of an anti-subsidy probe widely seen as retaliation for the bloc’s electric vehicle (EV) tariffs.

The tariffs will range from 21.9 per cent to 42.7 per cent, although most companies will pay around 30 per cent, and they target products like milk and cheese, including the iconic French blue cheese Roquefort. Duties will start being collected on Dec 23.

China’s Ministry of Commerce said it had found evidence that EU dairy imports were subsidised and hurting Chinese producers.

The European Commission, which oversees EU trade policy, said the investigation was based on “questionable allegations and insufficient evidence” and called the measures “unjustified and unwarranted”.

It already lodged a complaint at the World Trade Organization more than a year ago. “Right now, the commission is examining the preliminary determination and will provide comments to the Chinese authorities,” a spokesperson said, noting that the investigation was set to conclude by Feb 21.

The Dec 22 decision is provisional and could be revised when a final ruling is made. China significantly lowered provisional tariffs on pork in its final decision last week.

Trade tensions with the EU erupted in 2023 when the European Commission launched an anti-subsidy investigation into Chinese-made EVs. It imposed tariffs in October 2024.

In apparent retaliation, Beijing has imposed measures on imports of EU brandy, pork and now dairy.

However, as it did with pork, Beijing has reduced or limited the impact of its tariffs several times, including partly sparing major cognac producers Pernod Ricard, LVMH and Remy Cointreau after its brandy probe.

China’s Ministry of Commerce said negotiations over the bloc’s EV tariffs resumed in December; however, the talks were scheduled to end last week and there has been no announcement since. A senior European diplomat in Beijing said last week that major issues remained between the two sides.

China imported US$589 million (S$760 million) of dairy products covered by the current investigation in 2024, similar to 2023 values.

Roughly 60 firms, including Arla Foods, owner of brands like Lurpak and Castello, will pay tariffs between 28.6 per cent and 29.7 per cent. Italy’s Sterilgarda Alimenti will pay the lowest rate of 21.9 per cent while FrieslandCampina Belgium and FrieslandCampina Nederland will pay the highest rate of 42.7 per cent.

Firms that did not participate in the investigation will pay the highest rate.

Local dairy industry struggling

The decision is likely to be welcomed by Chinese producers who are grappling with a glut of milk and falling prices as declining birth rates and more cost-conscious consumers weigh on demand.

China, the world’s third-largest milk producer, urged producers in 2024 to rein in output and cull older and less productive cows. REUTERS