European brandy producers are suffering as China launches a tit-for-tat investigation

China has launched an investigation into imports of French brandy as tensions with Brussels continue to rise.

Chinese officials have said they will investigate whether European drinks makers are dumping their products on the market.

This is the process of exporting goods to a country at prices that do not reflect their costs.

It could ultimately put local producers and manufacturers out of business.

And Chinese authorities said the move was prompted by complaints from local producers.

Brandy is the most imported spirit in China, mainly coming from France. But the investigation from China comes just months after European Commission President Ursula von der Leyen unveiled a similar investigation into Chinese electric car imports.

“Global markets are now flooded with cheaper Chinese electric cars,” she said in September, despite warnings that this could lead to retaliation from Beijing.

China is a crucial market for European brandy makers, and news of the anti-dumping measure sent shares of luxury consumer goods companies across Europe plunging.

Pernod Ricard fell 5 percent in Paris. Diageo shares fell 1.6 percent in London, despite the group not importing brandy directly to China.

But analysts say the company has an indirect exposure of 2 to 3 percent of revenues through its stake in a joint venture with luxury giant LVMH.