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Chinese state media has hinted that Beijing may ‘hit back’ at European investigations by targeting wine, dairy and aircraft

Beijing hinted it could retaliate against the European Union in a trade dispute that shows signs of escalating in the same way as China’s battle with the US.

If the EU continues to investigate Chinese companies, China will “very likely have to take a series of measures to hit back,” according to a post on Yuyuan Tantian, a social media account linked to Chinese state media. Beijing has regularly used such channels as a way to express its ideas on trade.

The EU is investigating Chinese subsidies in a range of sectors, threatening tariffs on electric car makers and excluding companies from rail and energy tenders. President Xi Jinping visited Europe last month to stop the bloc from following the same path as the US, which last week announced new charges on certain imports from China – raising concerns in Beijing that US allies would follow suit.

The Chinese state media post did not specify countermeasures but quoted a lawyer who noted that the EU is dependent on China as a buyer of agricultural products such as wine and dairy, as well as aircraft. The Chinese Chamber of Commerce at the European Union echoed the warning, saying “European wine and dairy products could be caught in the crossfire.”

Chinese action in such areas would likely have limited economic impact to begin with, as these three industries accounted for only about 3% of China’s imports from Europe last year.

But if the two sides start taxing each other or using other tools to curb trade and investment, it would increase risks for companies around the world already dealing with the fallout from the US-China trade dispute.

“A much bigger puzzle will probably emerge with many more moving parts,” said Hosuk Lee-Makiyama, director of the European Center for International Political Economy in Brussels. For now, China’s signals through social media and trade groups pose “a threat that the government could walk away from” without appearing to be backing down, he said.

History shows that food and beverages are at high risk of becoming the target of a trade war. In the past, China has blocked Australian wine and barley, fruit from the Philippines and salmon from Norway, among other things, on grounds such as food safety or anti-dumping.

If China opposes European exports, it could open doors to other producers. France is the largest European exporter of wine to China. But Chinese wine imports have been shrinking for years, and the country recently removed punitive tariffs on Australian wine.

Last weekend, China announced an investigation into alleged chemical dumping by the EU, but also by the US and others. In January, China launched an anti-dumping investigation into EU liquors, including cognac – an issue raised during Xi’s talks in France.

EU leaders say the bloc’s industries are at risk from subsidized Chinese production and do not have fair access to Chinese markets. Some members have been cautious about responding with tariffs, but Ursula von der Leyen, head of the European Commission, said after a meeting with Xi that Europe is ready to use all available tools.

The investigations that have rattled Beijing include an investigation into EV makers that could lead to tariffs as early as July, as well as investigations that have led to Chinese companies withdrawing from solar supply tenders in Romania and trains in Bulgaria.

Europe supports its farmers with tens of billions of euros in subsidies every year and has tried to keep agriculture out of wider trade disputes.

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