China's Retaliatory Trade Measures and Their Impact on EU Export-Dependent Sectors

In the evolving landscape of global trade, the EU-China relationship has become a focal point of friction, with China’s retaliatory measures against European exports escalating in both scope and intensity. Recent anti-dumping duties on pork, dairy, and brandy—coupled with extended investigations—highlight a strategic shift in Beijing’s trade defense policies. For investors, understanding the sector-specific risks and opportunities amid this tension is critical to navigating a fragmented global economy.

Sector-Specific Risks: Pork, Dairy, and Brandy Under Fire

China’s imposition of preliminary anti-dumping duties on EU pork imports—ranging from 15.6% to 62.4%—represents a direct blow to European agricultural exporters. According to a report by Reuters, these duties, effective September 10, 2025, target fresh and frozen pork products, including internal organs, with Spain, the Netherlands, and Denmark among the most affected [1]. The Chinese Ministry of Commerce justified the move by citing “substantial damage” to domestic producers from EU exports sold below production costs [6]. While the EU has labeled the action retaliatory, the reality is that China’s agricultural sector, bolstered by state subsidies, is increasingly assertive in defending its market share.

The dairy sector faces an even more uncertain outlook. China extended its anti-subsidy investigation into EU dairy imports until February 21, 2026, citing the complexity of assessing subsidies under the EU’s Common Agricultural Policy (CAP) and national schemes in countries like Austria and Italy [2]. Although no final duties have been announced, the probe’s focus on cheese, milk, and cream signals a potential expansion of trade barriers. For France, which accounts for 37% of the EU’s dairy exports to China, the risk of retaliatory measures looms large [3].

Meanwhile, the brandy sector offers a nuanced case study. China accepted price undertakings from 34 EU producers, exempting them from anti-dumping duties if they adhere to agreed price thresholds [5]. This approach underscores China’s preference for negotiated solutions over blanket tariffs, but it also creates a fragmented playing field where compliance becomes a competitive advantage.

Broader Implications: Supply Chains and Strategic Responses

The ripple effects of these measures extend beyond individual sectors. China’s trade policies are increasingly weaponized to counter perceived imbalances, such as the EU’s 2024 tariffs on Chinese electric vehicles (EVs). As stated by the European Commission, China’s investigations into EU dairy and pork imports are part of a broader “trade siege” aimed at pressuring European policymakers [4]. This tit-for-tat dynamic risks deepening supply chain fragmentation, particularly in industries reliant on cross-border inputs. For example, the automotive sector faces dual pressures from Chinese export restrictions on rare earth materials and EU tariffs on EVs, compounding production challenges [6].

The EU’s response has been twofold: leveraging the WTO to challenge China’s measures and accelerating diversification of trade partners. A 2025 European Commission report highlights the EU’s trade surplus of €21.7 billion in services with China in 2024, underscoring the resilience of sectors like business services, education, and entertainment [2]. This contrast with vulnerable goods-based sectors suggests a strategic pivot toward intangible exports as a buffer against trade tensions.

Resilient Sectors and Investment Opportunities

For investors, the key lies in identifying sectors and strategies that mitigate exposure to China’s trade measures. The services sector, historically less targeted, offers a compelling case. With the EU’s surplus in services and growing demand for European expertise in areas like digital transformation and green technology, this sector is well-positioned to absorb shocks from goods-based trade disputes.

Diversification of trade partnerships further enhances resilience. The EU’s deepening Free Trade Agreements (FTAs) with Canada, Japan, and South Korea—announced in 2025—provide alternative markets for export-dependent industries [5]. For instance, machinery and chemical sectors, which have not yet faced Chinese anti-dumping measures, stand to benefit from expanded access to these markets.

Actionable Insights for Investors

1. Sector Rotation: Prioritize investments in EU services firms and companies with diversified export portfolios. Firms in business services, education, and renewable energy are less vulnerable to trade barriers.
2. Supply Chain Resilience: Support companies adopting nearshoring or regionalization strategies to reduce dependency on China. The EU’s “Strategic Autonomy” agenda emphasizes such approaches.
3. WTO Engagement: Monitor EU legal challenges to Chinese measures, as successful outcomes could reverse or limit trade barriers. The EU’s recent request for WTO dispute consultations on dairy investigations is a critical development [5].
4. Price Undertaking Compliance: For brandy producers, adherence to China’s price thresholds offers a competitive edge. Investors should favor firms with transparent pricing strategies and strong compliance frameworks.

Conclusion

China’s retaliatory trade measures are reshaping the EU’s economic landscape, creating both headwinds and opportunities. While pork, dairy, and brandy sectors face immediate risks, the broader economy is adapting through diversification and strategic realignment. For investors, the path forward lies in balancing caution with agility—hedging against sector-specific vulnerabilities while capitalizing on resilient growth areas. As global trade dynamics continue to evolve, the ability to navigate these tensions will define long-term success.

Source:
[1] China to impose preliminary anti-dumping duties on pork from the European Union [https://www.yahoo.com/news/articles/china-impose-preliminary-anti-dumping-100657683.html]
[2] EU trade relations with China - European Union [https://policy.trade.ec.europa.eu/eu-trade-relationships-country-and-region/countries-and-regions/china_en]
[3] Potential impacts of China's probe into EU dairy subsidies [https://www.rabobank.com/knowledge/q011441493-navigating-trade-tension-potential-impacts-of-chinas-probe-into-eu-dairy-subsidies]
[4] China Slaps EU with Anti-Dumping Duties—Trade [https://www.btcc.com/en-US/square/Cryptopolitan/910900]
[5] China accepts price undertakings from 34 EU firms in final ruling on brandy anti-dumping probe [https://global.chinadaily.com.cn/a/202507/05/WS6868de2fa31000e9a573a542.html]
[6] A smart European strategy for electric vehicle investment from China [https://www.bruegel.org/policy-brief/smart-european-strategy-electric-vehicle-investment-china]