Europe just fired the first shot in what could become a costly trade war with China.
The European Commission confirmed Tuesday it will impose provisional tariffs on solar panels imported from China, accusing subsidized exporters of flooding the EU at prices way below production cost.
"Our action today is an emergency measure to give life-saving oxygen to a business sector in Europe that is suffering badly from this dumping," said EU Trade Commissioner Karel de Gucht. He said the fair price of a solar panel from China would be 88% higher than the current price.
A tariff of 11.8% will apply to all Chinese solar panel imports starting June 6, and that will rise to an average of 47.6% two months later, creating what the EU hopes will be a window for further negotiations with China.
If negotiations fail, the EU will decide in December whether to impose permanent duties for up to five years.
The tariffs will apply to imports worth about 21 billion euros per year but could send a chill through the broader trading relationship, worth about 480 billion euros. The EU is China's biggest market, and China is the EU's second biggest trading partner after the United States.
In another trade dispute, the EU has accused Chinese telecoms network suppliers of dumping products below market prices.
Last month, China urged the EU to show restraint over solar panels, warning that the imposition of duties risked damaging its recession-hit economy and undermining the confidence of Chinese companies doing business in Europe. China said it would take steps to defend its interests.
De Gucht said China produces one and a half times world demand for solar panels, and action was urgently needed to defend some 25,000 European jobs in the industry and ensure future investment in research and development.
"This is not protectionism," de Gucht said. "Rather it is about ensuring international trade rules also apply to Chinese companies -- just like they apply to us."
The U.S. applied duties to Chinese solar panel imports last year, and the EU move follows a nine-month investigation triggered by a formal complaint from a group of more than 20 European producers.
But some EU member states, including Germany and the U.K., oppose duties because they're concerned about the impact on distributors, installers and consumers, and the effect of reprisals.