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CHANGZHOU, China — Business has come to a grinding halt in the city of Changzhou, which serves as the hub of China’s solar panel industry, as U.S. tariffs enacted in January freeze up exports at the same time that Beijing cuts subsidies and electricity prices.

“Not only has the panel plant closed, but the operation rate at the silicon wafer facility for solar cells has also plunged,” said an employee at Changzhou-based Trina Solar, one of the world’s top solar panel makers, as he exited the main factory’s side door. “Our June salaries fell to a little over 2,000 yuan ($295), just half of last year.”

Trina Solar’s main plant is located in an industrial park created by the local government to foster the panel industry. Cities in the coastal province of Jiangsu such as Changzhou were originally known for their textile industries, but have shifted to solar panels in recent years. The city has been called the “Silicon Valley of the East” after the material used in solar cells.

The company says the closure is part of a consolidation with another factory in the province and that the roughly 100 employees will be absorbed by a silicon wafer facility located in the same city.

Meanwhile, about 800 employees of energy conglomerate GCL Group recently protested outside of a closed panel factory in Changzhou where they used to work.

“Companies are only advertising about half of the positions they did last year,” said the manager of a local staffing agency.

The Chinese government has also promoted the solar panel industry with such support as generous aid. The country’s solar panel production grew about 40{0b7da518931e2dc7f5435818fa9adcc81ac764ac1dff918ce2cdfc05099e9974} in 2017 to 75 gigawatts, triple the level of five years ago. The result has been China’s domination of the global market as home to 70{0b7da518931e2dc7f5435818fa9adcc81ac764ac1dff918ce2cdfc05099e9974} of the world’s panel production.

However, the U.S. six months ago implemented levies of up to 30{0b7da518931e2dc7f5435818fa9adcc81ac764ac1dff918ce2cdfc05099e9974} on cheap Chinese solar panel imports — its first safeguard tariffs in 16 years — saying they have “seriously injured” American manufacturers. Such measures have virtually barred Chinese makers from the U.S. market.

“The Trump Administration will always defend American workers, farmers, ranchers, and businesses,” said U.S. Trade Representative Robert Lighthizer in January, launching the trade war’s first volley.

A second blow to Chinese panel makers came from home. Beijing moved to cut panel manufacturers’ subsidies by lowering the feed-in-tariff rate for renewable energy by 10{0b7da518931e2dc7f5435818fa9adcc81ac764ac1dff918ce2cdfc05099e9974} at the end of May, and excluding new megasolar plants from these contracts.

The reduction was prompted by China’s unexpectedly rapid spread of solar power. The country aimed to produce 110 GW of solar power in 2020, but output had already reached 130 GW by the end of last year. However, its distribution infrastructure has failed to keep up with production, with 20{0b7da518931e2dc7f5435818fa9adcc81ac764ac1dff918ce2cdfc05099e9974} of the solar power from places like the Xinjiang Uighur Autonomous Region likely going to waste.

“The short-term adjustment is aimed at long-term growth,” said an official from China’s Ministry of Industry and Information Technology, explaining the policy change.

This one-two punch to Chinese panel makers has some predicting lower production this year than last. Solar industry expert Wang Sichang estimates 1 trillion yuan and 2.5 million jobs will be lost in the fallout.

The Chinese government has finally begun to respond to the deteriorating conditions for domestic panel makers. It formed the International Investment Alliance for Renewable Energy, a consortium of panel makers and financial institutions under state guidance, at the end of June to cultivate new markets for export in place of the U.S.

President Xi Jinping’s economic zone from Asia to Europe known as the Belt and Road initiative will also help absorb some of China’s excess capacity.

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