European milk and pork producers wary of Chinese retaliation against tariffs on electric vehicles

By Casey Hall, Lucy Craymer and Mei Mei Chu

SHANGHAI/WELLINGTON (Reuters) – Global food companies, from dairy producers to pork exporters, are on alert for possible tariff retaliation from China following the bloc’s decision European Union on Wednesday to impose anti-subsidy duties on electric vehicles manufactured in China.

Chinese state media reported that domestic companies were preparing to call for investigations into some European imports of dairy and pork products over concerns of subsidies or dumping, moves that could lead to lengthy trade suspensions.

“If additional trade barriers are added, it could cause … a shake-up of global markets,” said Kimberly Crewther, executive director of the Dairy Companies Association of New Zealand.

New Zealand is the world’s largest exporter of dairy products and is also a production base for foreign companies, including French dairy producer Danone.

“We always prefer to see situations where trade is stable and certain…Markets don’t like uncertainty,” Crewther added.

The EU was China’s second-largest source of dairy products, accounting for at least 36% of total import value in 2023, second only to New Zealand, according to Chinese customs data. Australia was the third largest exporter.

Although it remains unclear which products China could target in the event of retaliation, whey powder, cream and fresh milk were the main export products of the 1.7 billion euros (1.8 billion) in dairy exports to China last year, according to European Commission data. Directorate-General for Agriculture and Rural Development, which cites Eurostat.

Countries like the Netherlands, France, Germany, Ireland and Denmark have the largest dairy industry exposure to the Chinese market.

The Netherlands, Denmark and France are also important suppliers of pork, although Spain was China’s top supplier last year, accounting for almost 23% of total pork imports. pork from China, followed by Brazil and the United States.

Cristina Alvarado, business manager of data and insights at the New Zealand Stock Exchange, said Chinese tariffs or trade barriers against EU dairy products could help New Zealand further increase its market share .

Major New Zealand producers Fonterra and A2 already have thriving trade with China, and Australia and New Zealand have free trade deals with China that exempt their imports from tariffs.

China imported $848 million worth of dairy products from Australia last year, according to Chinese customs data. Its dairy imports from New Zealand reached $5.52 billion in 2023, almost half of the total value of its dairy imports.

OPEN TRADE

As trade tensions between the bloc and China escalate, some European officials have warned against imposing import duties on food products.

European Agriculture Commissioner Janusz Wojciechowski told Reuters during his visit to China in late April that he intended “to avoid as much as possible that agriculture pays the cost of problems in other sectors”.

“The position of the European Union is that free trade in food products is a very important instrument for ensuring food security at global level,” he added.

China has historically occupied a different position, with food products often the target of retaliatory tariffs imposed in previous trade spats.

In January, Brandy was targeted by an investigation launched by Beijing, a move seen as retaliation for France’s support of the EU investigation into Chinese-made electric vehicles.

China also passed a law in April to strengthen its ability to retaliate if the United States or EU imposed tariffs on exports from the world’s second-largest economy.

Australian wine and barley have been targeted by an anti-dumping investigation launched by Beijing following Australia’s calls for an independent investigation into the origins of the COVID-19 virus in 2020. China only recently lifted these prohibitive customs duties.

Beijing has also targeted Australian beef and lobsters following separate investigations.

($1 = 1.6292 New Zealand dollars)

(Reporting by Casey Hall in Shanghai, Mei Mei Chu in Beijing and Lucy Craymer in Wellington; editing by Miyoung Kim)

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