China has launched an anti-subsidy investigation into dairy products imported from the European Union (EU), a move widely interpreted as retaliation for the EU’s recent tariff increases on Chinese electric vehicles (EVs). The probe, initiated by China’s Ministry of Commerce, targets a range of dairy products, including fresh and processed cheese, uncondensed milk, and cream without added sugar. This investigation follows a complaint from the Dairy Association of China and the China Dairy Industry Association, which raised concerns that EU subsidies were harming local dairy producers.
Background and Context
The investigation comes in response to the EU’s revised tariff plan on Chinese EVs. Although the EU reduced the proposed punitive duties from 37.6% to 36.3%, it did not fully abandon the tariffs, prompting a sharp response from Beijing. The Chinese government expressed its disapproval of the EU’s stance, escalating trade tensions between the two economic powers.
Scope of the Investigation
China’s investigation will scrutinize 20 different subsidy schemes benefiting the EU dairy industry, focusing on countries like Austria, Belgium, and Ireland. The probe will examine the impact of these subsidies on China’s domestic dairy market from April 2023 to March 2024 and evaluate potential industrial damage dating back to January 2020.
Trade Impact
The investigation could have significant implications for EU dairy exports to China, which were valued at approximately €1.7 billion in 2023. In the first seven months of the year, China imported over $315 million worth of dairy products from the EU, with France and Italy being key contributors.
This development reflects the escalating trade conflict between China and the EU, highlighting the broader geopolitical and economic rivalries at play. As both sides continue to take retaliatory measures, the future of their trade relations remains uncertain.
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