BEIJING/BRUSSELS: China escalated its trade dispute with the European Union by announcing steep provisional tariffs on EU dairy imports, a move widely seen as retaliation for Brussels' duties on Chinese electric vehicles.

Beijing said it will impose duties of between 21.9% and 42.7% on certain EU dairy products from Tuesday, with most exporters facing rates just under 30%. The measures apply to unsweetened milk and cream as well as fresh and processed cheeses, including French varieties such as Roquefort and Camembert.

China's Ministry of Commerce said its investigation found evidence that EU dairy imports were subsidised and harming domestic producers.

The European Commission, which oversees EU trade policy, said the investigation was based on "questionable allegations and insufficient evidence" and described the measures as "unjustified and unwarranted".

It noted that it had already lodged a complaint at the World Trade Organization more than a year ago.

"Right now, the Commission is examining the preliminary determination and will provide comments to the Chinese authorities," a Commission spokesperson said, adding that the investigation is due to conclude by Feb. 21.

Monday's decision is provisional and could still be revised. China significantly lowered provisional tariffs on EU pork when it issued its final ruling on that product last week.

Trade frictions between the two sides intensified in 2023 after the European Commission launched an anti-subsidy probe into Chinese-made electric vehicles. The EU imposed tariffs on those vehicles in October 2024.

In what Brussels sees as retaliation, China has since announced measures against EU brandy, pork and now dairy products.

Conor Mulvihill, director of Dairy Industry Ireland, said it was frustrating that dairy appeared to be used as a "political pawn" in the broader EU-China EV dispute.

China's commerce ministry said talks over the EU's EV tariffs resumed this month, though a senior European diplomat in Beijing said last week that significant differences remain. The Commission said it continues to explore replacing tariffs with minimum price commitments, provided they remove the impact of unfair subsidies and are workable.

China imported $589 million worth of dairy products covered by the investigation in 2024, similar to the previous year.

Tom Booijink, senior dairy specialist for Europe and Africa at Rabobank, said a tariff of more than 40% would make EU exports prohibitively expensive.

"So I think New Zealand will be quite happy with this," he said, adding that French producers would likely be hit hardest.

The products targeted do not include infant formula, which is a high-margin export for European dairy companies.

Around 60 firms, including Arla Foods, which owns brands such as Lurpak and Castello, will face duties of between 28.6% and 29.7%. Italy's Sterilgarda Alimenti will pay the lowest rate of 21.9%.

Dutch dairy group FrieslandCampina, which faces the highest tariff of 42.7%, said it was committed to "constructive dialogue" with China's commerce ministry. Henrik Damholt Jorgensen, CEO of the Danish Dairy Board representing Arla, said he hoped the issue could still be resolved without tariffs.

The decision is expected to benefit Chinese dairy producers, who are struggling with oversupply and falling prices amid declining birth rates and more price-conscious consumers.

Shares in MengNiu Dairy briefly jumped after the announcement before ending Monday's session little changed.

China, the world's third-largest milk producer, has seen milk prices fall for three consecutive years, unlike most global markets. Authorities last year urged producers to curb output and cull older, less productive cows to stabilise the sector.