Caught in the crossfire: Cognac pays the price for Europe’s trade wars

As the Cognac harvest nears completion in southwestern France, winemakers anticipate another challenging year. Renowned for its amber spirit, Cognac is exclusively produced along the Charente River, but it has been caught in the middle of trade disputes between the European Union and China, along with tensions with its largest export market, the United States.

For months, producers have watched helplessly as access to both markets has been restricted. The industry has deep roots in the EU, with French politician Jean Monnet, considered a founding father of the European Union, hailing from a Cognac-producing family and working within the family business. However, the sector is currently struggling due to declining sales.

Cognac is heavily reliant on foreign markets, with 98% of its production exported outside the EU. Unsurprisingly, this year's drought has helped supply meet the decreasing demand. Matthieu Augier, a vinegrower in Gondeville, explained that due to the drought, the harvest is projected to decrease by 30 to 40% economically. He noted that, in a way, nature helps regulate surpluses.

Since 2023, Cognac sales have dropped from 230 million to 140 million bottles. The four major trading companies - Rémy Martin, Hennessy, Martell, and Courvoisier - had to reduce their orders from vinegrowers in the region after clients cancelled their contracts. The decline was initially attributed to the trade war with China, which represented around 25% of Cognac's exports.

Raphaël Delpech, Director of the National Interprofessional Cognac Bureau (BNIC), stated that the industry has been "collateral damage" in the trade war that began in 2023 between the EU and China over Chinese electric vehicles (EVs). China retaliated by imposing up to 34.8% duties on Cognac in 2024, while the EU retaliated by imposing up to 35.3% tariffs on Chinese EVs.

China later exempted major Cognac producers that agreed to sell above undisclosed minimum prices, but the damage had already been done. Once Beijing singled out the industry, consumers distanced themselves, and distributors stopped buying their bottles. The situation worsened when the US imposed sweeping tariffs during its first administration under Donald Trump in April 2025. The US and EU then reached an agreement at Turnberry, Scotland, setting a 15% tariff on most European exports to the US, including Cognac.

Despite the European wine and spirits industry lobbying for exemptions from the 15% tariff, progress remains limited. French MEP Eric Sargiacomo, deputy chair of the European Parliament's intergroup on wines and spirits, expressed uncertainty about the situation, while French President Emmanuel Macron visited the region and promised compensation to winegrowers, which has yet to materialize.

The Cognac crisis highlights the need for the EU to protect sectors affected by retaliation against European trade measures. Delpech argued that the European policy cannot be strong if it does not safeguard industries that bear the brunt of trade-offs. To adapt to lower demand, the industry has launched two vine-grubbing schemes backed by financial support, but vine removal applications have been limited, covering only 560 hectares out of 96,000 hectares within the Cognac appellation.