The European Union announced Tuesday that it is imposing anti-dumping levies on imports of Chinese solar panels, in a move that could trigger a trade war between two of the world's largest economies.

EU Trade Commissioner Karel De Gucht said the 27-nation bloc will impose a tariff of about 12% on the import of solar panels, cells and wafers from this week, increasing it to an average of 47% in August unless a settlement is reached with China in the next 60 days.

China, the world's largest producer of solar panels, is accused by the EU of selling them below-cost — a tactic known as dumping — to corner the market. Its exports of solar panels to Europe totaled 21 billion euros in 2011.

The cheap Chinese products are flooding the market and threaten to bring down EU manufacturers, De Gucht told journalists in Brussels.

According to EU calculations, a fair sale price for Chinese solar panels should 88% higher than what they are currently being sold for.