China has initiated an investigation into whether European Union (EU) dairy producers benefit from unfair government subsidies, escalating an already tense trade dispute between Beijing and Brussels. The announcement from China’s Ministry of Commerce on Wednesday follows concerns raised by local dairy producers about 20 subsidy programs in the EU. These programs allegedly include financial support for farming equipment, supplementary income for young farmers, and various environmental and administrative subsidies.

According to the Ministry of Commerce, an initial review found sufficient evidence to warrant a full anti-subsidy investigation, which could last up to 18 months. The EU is one of the world’s largest dairy exporters, with China being a significant market for its skim-milk and whole-milk powders. European Commission data shows that while the United Kingdom and United States are the primary destinations for the EU’s butter and cheese exports, China ranks third for butter and eighth for cheese.

This probe by China comes just a day after the EU confirmed plans to impose additional tariffs on most electric vehicles (EVs) imported from China. The trade conflict between the two powers has been intensifying over the past year, particularly after the EU launched an investigation last September into China’s state support for its EV manufacturers. The EU is also scrutinizing China’s backing of its wind turbine industry.

In response to the EU’s actions, China has not only initiated this dairy investigation but also launched anti-dumping investigations into EU exports of brandy and pork products. This tit-for-tat strategy highlights the deepening rift in trade relations between the two economic giants.

Olof Gill, a spokesperson for the European Commission, stated that the EU would closely monitor China’s dairy investigation to ensure it adheres to World Trade Organization (WTO) rules. He emphasized that the European Commission is prepared to intervene as necessary and will firmly defend the interests of the EU dairy industry and the bloc’s Common Agricultural Policy.