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US-China trade war leave some solar firms reeling

One U.S. company operating in the fast-growing solar industry announced it has to close a manufacturing plant, and it is blaming the federal government.

Hemlock Semiconductor, a subsidy of Dow Corning, announced last week it had to shutter a facility in Clarksville, Tennessee, in part because of market conditions arising from "global trade disputes." These conflicts are tied to an escalating series of import taxes between the U.S. and China, a spokesman for the company told CNBC.

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The Hemlock announcement came just one day after the Department of Commerce said it would institute even stricter tariffs against Chinese-made solar products. That ruling came after German-owned SolarWorld—which claims to be America's largest solar panel manufacturer—petitioned for help to guard against what it said were unfair trade practices from China.

Both Hemlock and Solarworld have become unlikely victims in a battle between the world's two largest economies, and dueling policies that are spilling over into the alternative energy sector.

Some in the U.S. solar industry said the government's decision to implement the new tariffs is counter-productive to its own environmental, employment, and manufacturing goals. They argue the government's position makes it hard for solar companies to compete globally.

"This is not protectionism: We're getting disrupted, this is actually a net bad thing for U.S. jobs," said Jigar Shah, chairman and co-founder of the Coalition for Affordable Solar Energy (CASE). "Some people say anything we can do to poke China in the eye is fantastic, well that's short-sighted."

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The Department of Commerce did not immediately respond to a request for comment.

For its part, Hemlock found "the continued market adversity and complex political conditions have left no economically viable options for Hemlock Semiconductor to operate the site," its president, Denise Beachy, said in an announcement. Hemlock makes polycrystalline silicon used in the manufacturing of solar cells and modules.

'Going to have to lay people off'

Shah said the difficulties experienced by Hemlock are being felt throughout the industry. Solar manufacturing and installation relies on a global supply chain that requires some components to start in the U.S., get assembled in China, then come back across the Pacific for final touches.

"Many of [CASE's] members are going to have to lay people off," Shah said. "But the real layoffs are coming from people who aren't getting hired...Raising prices on solar modules mean that many of the projects we've already signed are going to become uncompetitive."

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SolarWorld argues that Chinese manufacturers are heavily subsidized by Beijing, and therefore can out-price competitors around the globe. In 2012 the U.S. government decided in favor of imposing tariffs on Chinese firms because of complaints from Solarworld—and the most recent decision seeks to close a loophole to that first ruling.

That loophole, SolarWorld and the Commerce Department both said, is that Chinese firms would outsource one piece of the manufacturing process to Taiwan to avoid the tariffs when exporting to the United States.

"These remedies come just in time to enable the domestic industry to return to conditions of fair trade," Mukesh Dulani, U.S. president of SolarWorld, said in an announcement following the Commerce Department decision. "The tariffs and scope set the stage for companies to create new jobs and build or expand factories on U.S. soil."

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But CASE argued that the addition of a third country to the ongoing trade dispute will just confuse the supply chain, and hurt the growth of solar technology across the world. The state of play raises the possibility that a third country could find itself in the crosshairs of the standoff between China and the U.S.

"When SolarWorld went after China we thought it would be the end of it, but now they're going after one of the U.S.'s staunchest allies in Taiwan," Shah said. "We have no idea where the madness will stop—there's no rhyme or reason to how these trade cases are going down."

Shah said he hopes the White House will come to agree with CASE's outlook, and will act to "promote free trade around the world, particularly on climate change initiatives."

The new duties on Chinese and Taiwanese solar products will go into effect around Feb. 1.