Cornering over 97% of the world rare earths market, China is the largest producer and exporter of rare earths and in the last couple of years has sought to curtail exports. But that move led to the US, EU and Mexico filing a complaint at the WTO against China’s regulations of critical metals.

Now that trade war appears to be spilling into the manufacturing sector, especially in the cleantech industry, the growth of renewable energy projects is threatened at a time when climate change concerns are a key driver in developing energy policies.

The solar trade war flared after the US subsidiary of Germany’s SolarWorld filed an unfair trade complaint with the federal government earlier this year. SolarWorld and six other US solar cell and module manufacturers argued the Chinese government unfairly subsidised the domestic industry through cheap loans, favourable real estate deals and other incentives.

The US Commerce Department, in an anti-dumping ruling, slapped Suntech, a leading Chinese photovoltaic cell maker with a 31.22% tariff, while other companies such as Trina and Yingli, that have also captured a significant market share in the US, would have pay a 31.18% tariff.

While a final decision is expected in November, tariffs of more than 60% could be imposed on the Chinese manufacturers.

Not to be outdone and potentially heating up the situation, the Chinese government late last month issued a “fact sheet” with a preliminary finding that state renewable energy policies in the US violate free-trade agreements.

However, China’s commerce ministry did not specify which states or what specific policies allegedly violated the free-trade regulations.

According to the US Commerce Department, Chinese companies exported $US3.1 billion of solar cells to the US last year, but the department concluded that the Chinese products were sold into the US “for less than fair value.”

Analysts say at a time when solar PV is taking off, with PV prices plunging almost 75% in recent years, the trade politicking could stymie growth in the sector.

However, others say China could circumvent US anti-dumping laws by moving manufacturing overseas to Vietnam, for example, but that could only aggravate the situation and potentially bring other countries into the trade war.

This article first appeared in ILN's sister publication EnergyNewsBulletin.net.