Dark truth about Sino-US solar spat

Trade disputes can often be resolved through dialogue. A good example of this process is the recent deal between China and European Union (EU) concerning solar panels.

Dialogue does not always work, however, when it comes to trade between China and the United States.

China finally decided on Tuesday to impose five-year duties on solar-grade polysilicon imports from the US. (South Korea was also hit with duties, although with a much lower rate.)

The decision by the Chinese side is not ungrounded.

Apart from technical issues, the move was in response to similar duties the US placed on Chinese exports of solar panels to the US in 2012. The US decision led to factory closures and loss of jobs in China.

By protecting domestic industry from the undesired knock-on effect of foreign products, the two countries have sent an unequivocal message of trade war.

It would benefit neither of the two sides if the ramifications of this solar spat spill over into other parts of the world.

Through dialogue, a negative situation can be avoided.

Tension was once on the rise between China and the EU regarding China's alleged dumping of solar panels in Europe. Thanks to some diplomacy, and a willingness of industries in both countries to compromise, a deal was struck.

The US and EU have different economic prospects and trade strategies. The US is having a fairly solid and steady recovery, while recovery in Europe remains quite fragile.

Still, a hard-line trade strategy by the US would only backfire, as the latest Chinese response indicates.