China decided on Wednesday to hit Europe where it hurts by launching an investigation into European wine imports, in retaliation against a decision by the European Union (EU) on Tuesday to impose duties on Chinese solar panel imports.
China's Commerce Ministry said that Europe had "obstinately imposed unfair duties" and said the government had begun an anti-dumping and anti-subsidy probe into EU wines at the request of Chinese wine manufacturers, Reuters reported on Wednesday.
"The Commerce Ministry has already received an application from the domestic wine industry, which accuses wines imported from Europe of entering China's market by use of unfair trade tactics such as dumping and subsidies," the ministry said in a statement.
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"This is impacted upon our wine industry, and (they have) asked the Commerce Ministry to begin an anti-dumping and anti-subsidy probe," it added.
The move is designed to hurt Europe's wine industry which has benefited in recent years from booming demand in China.
China imported 430 million liters of wine last year, of which more than two-thirds came from the EU, according to Chinese customs figures. Imports from France alone came to 170 million liters.
Europe's 11.8 percent levy on Chinese solar panels will start on Thursday and last for a transition period of 60 days before the full tariff will be imposed.
"We have decided to do this in a staged way so in the first 60 days the duty will be 11.8 percent and after 60 days we will go to 47 percent unless, unless in that period of 60 days we come to an amicable solution and that's what we're aiming at," Karel De Gucht, the European Union (EU) trade commissioner, told CNBC on Tuesday.
(Read More: EU Gives China Two Months to Resolve Solar Row )
"Giving the very high market share of Chinese producers in the European market it also gives the European market space to adapt to that new market situation," he added.
Before the decision, China warned Europe that the trade dispute touched its "major economic interests" and could damage Sino-European relations.
(Read More: EU to Impose Solar Duties Despite Bloc's Division)
De Gucht said that the 120 Chinese solar producers would have to negotiate on price levels and import volumes: "Afterwards that would have to be ratified so we would have to accept those undertakings. We can do that within 60 days but of course that depends on the parties involved," he said.
He denied that there had been pressure from certain EU member states for a transition period. "If we do not intervene then the solar industry will disappear in Europe. We just have to reinstate the level playing field."
Charles Yonts, head of sustainable research at brokerage CLSA told CNBC's "Worldwide Exchange" that the tariff could in fact hurt Europe more than China, because solar installers depended on cheap imports from China.
"Any anti-dumping tariff will have an adverse effect on demand, the EU is shrinking as a share of total global solar demand but it's still about one-third of the demand for Chinese manufacturers. But ironically it seems it would hit the installers and the solar farm operators in Europe much harder than it would hit the Chinese manufacturers," he said, adding that it could, in turn, lead to job losses.
James Gandrey, EU analyst at IHS, told CNBC that talk of a trade war was "premature."
"Yes, this is the biggest anti-dumping investigation that the EU has undertaken but let's keep in mind that the value of solar panel imports in 2011 was valued at 21 billion euros but trade between the EU and China every day is worth one billion euros. That helps give us some perspective on this."
He said countries such as Germany, which sees China as a valuable export market, had "heavily pressured" the European Commission to scale back its tariffs and he couldn't see the levies lasting.
"These are provisional tariffs, they can only run until December, after that point there has to be a majority among the member states and the European Council for them to go long-term...at the moment there's little chance of that."
-By CNBC's Holly Ellyatt, follow her on Twitter @HollyEllyatt
-Reuters contributed reporting to this story