China Escalates Trade Tensions with EU by Launching Anti-Subsidy Probe into Dairy Imports

This move is seen as a direct response to the EU’s decision to impose revised duties of 36.3% on Chinese EV imports, slightly lower than the initially planned 37.6%, but still short of Beijing’s demand to abandon the tariffs altogether. The investigation will scrutinize 20 subsidy schemes across several EU countries, with a focus on major dairy exporters like Ireland, which alone exported $461 million worth of dairy products to China last year.

The EU is China’s second-largest source of dairy products, accounting for 36% of China’s dairy imports in 2023. The ongoing trade dispute underscores the broader economic tensions between the two regions, particularly following China’s earlier anti-dumping probe into EU pork imports in June.

Analysts suggest that while the value of affected EU exports is smaller compared to China’s EV exports to the EU, the growing strain highlights the delicate balance China must maintain in its trade policies, given its reliance on external demand to support its economy.

"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.