China will not impose punitive tariffs on imports of polysilicon, which is used in the production of solar panels, from the European Union, the German Economy Ministry said.

The ministry confirmed a report due to appear in the Handelsblatt newspaper saying that China would not impose tariffs on the polysilicon, which would have hurt German firms that export the material to Chinese solar power panel makers.

The newspaper said the German government had been working hard to reduce tensions between the EU and China following the decision by the European Commission, the EU’s executive arm, to impose duties on Chinese solar panel imports.

The European Union and China are moving towards a deal to defuse a conflict over alleged dumping of solar panels in Europe, officials from both sides said last week, aiming to head off a damaging trade war in goods from steel to wine.

The European Commission accuses China of flooding Europe with billions of euros of cheap solar panels sold at below the cost of production, and has imposed duties that will jump up to punitive levels in August.

Punitive tariffs have the potential to affect 21 billion euros ($26.95 billion) of imported Chinese solar panels, cells and wafers from manufacturers such as Trina Solar, Yingli Green Energy and Suntech Power Holdings. (Reuters)