BERLIN (AP) -- The European Union announced Tuesday that it is to impose anti-dumping levies on imports of Chinese solar panels, in a move that could trigger a trade war between two of the world's largest economies.
EU Trade Commissioner Karel de Gucht said Tuesday the 27-nation bloc will impose a tariff of about 12 percent on the import of panels, cells and wafers immediately, increasing it to an average of 47 percent starting in August unless a settlement is reached with China.
China is the world's largest producer of solar panels and is accused by the EU of selling them below-cost to corner the market. Its exports of solar panels to Europe totaled 21 billion euros in 2011.
De Gucht said the price at which Chinese solar panels are sold in Europe should be 88 percent higher according to the Commission's calculations. Chinese solar panels' market share in the EU has risen to 80 percent over recent years.
The cheap Chinese products are flooding the market and threaten to bring down EU manufacturers, de Gucht warned.
"It has the potential to destroy an important industry in Europe if we don't act today," he added.
The Commission, the bloc's executive arm, hopes to reach a settlement with Beijing and has therefore taken a phased approach that leaves two months for intense negotiations before the special duties reach the punitive level of 47 percent.
"The ball is now in China's court," de Gucht said.
"This is a one-time offer to the Chinese side to negotiate."
The trade row between the EU and China is the world's biggest anti-dumping case by sales volume, according to EU officials.
The global solar panel market is suffering from overcapacity, which has led to stiff competition that has forced several European manufacturers out of business.
De Gucht added that to reach a settlement, Chinese manufacturers would have to agree to increase their prices and accept a lower market share quota.
"I would like to see an agreement. If we get it right it would be better for both sides," he stressed.
If a settlement can't be reached, the permanent anti-dumping tariffs would require approval by a majority of the EU's 27 member states six months from now.
But several EU nations, including heavyweight Germany, have spoken out against imposing special duties and urged the Commission to reach a settlement with China.
Germany has the bloc's biggest solar industry, but Berlin fears imposing special duties could provoke Chinese retaliation on imports of European goods which, in turn, would harm German exporters.
China rejects the EU's price-dumping allegations. Premier Li Keqiang warned last month imposing punitive tariffs would hurt European consumers and might encourage trade protectionism, stopping short of threatening retaliation.
But the problem with the solar industry is not new for Beijing. The U.S. last year imposed punitive tariffs on solar panel imports after finding that China's government was subsidizing companies that were flooding the U.S. market.