The European Union (EU) has announced that it will imposed a punitive tariff of 11.8% on Chinese solar panel imports which will be raised to 47.6% on August 6th if negotiations are not carried out. The tariffs will be temporary for the first 6 months. If negotiations fail to take place or do not reach an amicable solution, the tariffs will be imposed permanently on December 6th.

EU Trade Commissioner Karel De Gucht said, “Today, the European Commission has decided unanimously to impose (punitive) tariffs.” He said that it was clear the Chinese solar panel makers were dumping on their nations by selling at around 88% below cost. The ‘dumping’ is harmful as 25 000 jobs were being threatened as Chinese companies took around 80% of the market.

Germany has led a fierce opposition against the tariffs, reportedly winning the support of around 17 other European nations. They promised to try and resolve the issues without the implementation of import tariffs. When the announcement was made, German Economy Minister Philipp Roesler said that it was “a serious mistake.” Many fear a fierce trade war will follow if heavy tariffs are permanently imposed.

The interim tariff is set to begin tomorrow, 6th June 2013. It is predicted that the tariff may actually cause an immediate inflow of panels and give the industry some ‘life-saving oxygen’ before higher, harsher tariffs are imposed. Commissioner De Gucht hopes that the lower tariff is enough to bring the Chinese to the bargaining table and hopes that a solution can be reached before the December deadline.

“A negotiated amicable solution is likely because the negative impacts of import duties on the European Union would outweigh any benefits,” said Robert Schramm-Fuchs, solar analyst at Macquarie Group Ltd. He suggested that likely solutions may include setting minimum prices for Chinese solar panels or import quotas. Even though the EU has made the first move toward discussions, with their significant trade, China will still have the upper hand at the bargaining table.

Import tariffs can have many short and long term effects on the market as a whole. Ilja Nothnagel, Foreign Trade Director of Association of German Chambers of Industry and Commerce (DIHK) said “Rising prices mean that maybe some investment will be cut down, maybe some importers will go down, maybe some less solar panels will be put on the roof, then all those craftsmen installing the panels on the roof are hit.”

The Alliance of Affordable Solar Energy (AFASE) have already issued a petition to the Trade Commissioner asking for the tariff to be halted immediately. “The EU Commission’s proposed import tariffs on solar panels directly harm the EU’s fight against climate change,” the petition letter read, “They will make solar energy, a major tool in combating climate change, more expensive than dirty coal or nuclear.”

As the Commissioner has said, “The ball in now in China’s court.”