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

BEIJING, Dec 22 (Reuters) - China will impose provisional duties of up to 42.7% on certain dairy products imported from the European Union after concluding the first phase of an anti-subsidy probe widely seen as retaliation for the bloc's electric vehicle tariffs.

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

The European Commission did not immediately respond to questions about the decision.

Monday's 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 - which oversees the bloc's trade policy - launched an anti-subsidy investigation into Chinese-made electric vehicles.

Beijing has investigated and imposed tariffs on imports of EU brandy, pork and now dairy, measures seen as retaliatory.

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 this month, 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 $589 million of dairy products covered by the current investigation in 2024, similar to 2023 values.

CHINA SAYS EU PROVIDES SUBSIDIES

The Ministry of Commerce said in a statement it had found evidence that EU dairy imports were subsidised and hurting Chinese producers.

Roughly 60 firms, including Arla Foods, owner of brands like Lurpak and Castello, will pay tariffs between 28.6% to 29.7%.

Italy's Sterilgarda Alimenti SpA will pay the lowest rate of 21.9% while FrieslandCampina Belgium N.V. and FrieslandCampina Nederland B.V. will pay the highest rate of 42.7%.

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 last year to rein in output and cull older and less productive cows.

(Reporting by Yukun Zhang, Shi Bu, Ryan Woo, Daphne Zhang in Beijing; Charlotte Van Campenhout in Amsterdam, Editing by Christopher Cushing, Michael Perry and Neil Fullick)