U.S.-China solar panel dispute could escalate into trade war

The U.S. and China are at odds again over solar panels.

The U.S. Commerce Department said Tuesday it will impose import tariffs of up to 35% on Chinese solar panels, even if the panels contained solar cells made outside of China.

The move follows a complaint from SolarWorld Industries America, a subsidiary of a German company, which claimed that Chinese firms were able to avoid U.S. tariffs set in 2012 by using a loophole that allowed them to use non-Chinese solar cells to make the panels.

This solar panel dispute could set the stage for a trade war between the U.S. and China said Yahoo Finance Editor-in-Chief Aaron Task. It could also have an impact on U.S. companies who want to do businesses in China, he said.

The Chinese government said it’s “strongly dissatisfied” with the decision and it warned that it would hurt trade relations between the two countries. The Chinese Commerce Ministry said on its website that the U.S. “ignored the facts” and the new import duties “won’t solve the problems of the U.S. solar industry.”

The U.S. Commerce Department and the U.S. International Trade Commission still need to issue a final ruling. A similiar antidumping decision is due in late July.

On the news, U.S. solar companies First Solar (FSLR), SunPower (SPWR) traded higher, but Chinese solar companies Trina Solar Limited (TSL), JinkoSolar (JKS) and Yingli Green Energy (YGE) all took a hit in early trading on Wednesday.

Separately, the Commerce Department reported on Wednesday that trade gap with China widened by nearly 34% or $7 billion to $27.3 billion in April from March.