China has launched an anti-subsidy investigation into dairy imports from the European Union, the latest development in a tit-for-tat trade dispute between the two sides. 
The probe will target several dairy products, including fresh and processed cheese, China’s Ministry of Commerce said in a statement Wednesday. EU dairy exports to the nation were valued at €1.7 billion ($1.9 billion) last year, official figuresshow.
The latest move escalates a growing tussle over subsidies that started with electric vehicles and spread to pork and cognac. Earlier this year, the EU determined that Chinese subsidies had given the country’s carmakers an unfair cost advantage over local companies, and it moved forward with added tariffs on battery-electric vehicles shipped from China.
The bloc said Tuesday it intended to move forward with the import levies, and it also announced tariffs on Tesla Inc. cars made in China.
The dairy probe, initiated at the request of industry groups in China, will review 20 EU subsidy programs, including some under the Common Agricultural Policy and others available in Italy and Finland, the ministry said. The investigation is expected to be completed within a year and can be extended for another six months under special circumstances.
China imports dairy products from European nations, including the Netherlands and France, but New Zealand is its top supplier. The Asian nation’s purchases have fallen in recent years due to rising domestic production and an economic downturn. 
The European Commission notes China’s investigation and plans to “firmly defend the interests of the EU dairy industry,” spokesman Olof Gill said. It will intervene as appropriate to ensure the investigation complies with relevant World Trade Organization rules, he said.
Trade groups such as France’s Fédération Nationale de l’Industrie Laitière stressed cooperation with Chinese authorities throughout the consultation period.
“We trust that the EU and China will find a constructive way to resolve any bilateral disputes, as has happened in the past over other matters,” said Alexander Anton, secretary general of the European Dairy Association.
Meanwhile, the government in Germany, which led EU dairy exports to China in 2023, “believes that an amicable solution is desirable and the right way forward in international trade relations in order to avoid the threat of escalation, which would harm everyone,” spokesman Wolfgang Buechner said.
Milchindustrie-Verband, which represents the nation’s milk industry, said cheese and cream products may be particularly affected. 
EU leaders have stepped up efforts to defend against what they view as unfair trade practices, bringing their China policy closer to that of the US. Beijing’s relationship with the bloc has soured in recent months as a result.
“Following the move of an anti-dumping probe on the EU pork industry announced in mid-June, to some extent some market participants in the EU dairy industry anticipated that this could happen,” said Jose Saiz, a senior analyst at market intelligence provider Expana. 
The EU wasn’t expecting strong demand from China this year anyway and was already seeking alternative markets, he said.

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(Updates with comments from trade groups, German government starting in ninth paragraph.)