China opens anti-subsidy probe into EU dairy imports in push back against EV tariffs

China opened an anti-subsidy probe into imported dairy products from the European Union on Wednesday, stepping up tension with the bloc a day after Brussels published its revised tariff plan for China-made electric vehicles.

The EU on Tuesday revised its proposed punitive duties on imports of Chinese EVs to 36.3% from an initial planned duty of 37.6%, but fell short of abandoning them, as Beijing had called on Brussels to do.

The revision drew rebuke from China’s commerce ministry, which in response said it is “firmly opposed to and highly concerned” about the findings, and vowed to take all necessary measures to protect Chinese firms.

The anti-subsidy investigation on dairy announced by China’s commerce ministry on Wednesday will focus on various types of cheeses, milks and creams intended for human consumption. It was prompted by a complaint submitted by the Dairy Association of China and the China Dairy Industry Association on July 29 on behalf of the domestic dairy industry, the ministry said.

China will examine 20 subsidy schemes from across the 27-strong bloc, specifically those from Austria, Belgium, Croatia, Czech Republic, Finland, Italy, Ireland, and Romania, it said in a statement.

Of the countries listed, Ireland is by far the biggest exporter of dairy products to China, having sold $461 million worth of goods to the Asian nation last year.

The EU was China’s second-largest source of dairy products with at least 36% of the total value of imports in 2023, behind only New Zealand, according to Chinese customs data.

The EU exported 1.7 billion euros in dairy products to China in 2023, down from 2 billion in 2022, according to data from the European Commission’s Directorate-General for Agriculture and Rural Development, which cited Eurostat.

China already launched an anti-dumping probe into imports of EU pork in June, which mainly affects Spain, the Netherlands and Denmark, in a tit-for-tat move against the EV tariffs.

“The combined value of EU pork and dairy exports to China —areas of goods potentially affected by tariffs — are smaller than the value of China’s battery EV exports to the EU, which we estimate to stand at around $13.5 billion in 2023,” Chim Lee, senior China analyst at the Economist Intelligence Unit.

“Domestic economic pressures, alongside the increasingly important role played by external demand in supporting China’s economy, will keep Chinese policymakers cautious about invoking an overly confrontational approach to trade,” Lee said.