Could the EU’s “big bazooka” be deployed against the US?

Now that President Donald Trump’s erratic and shaky trade war with the European Union is on partial pause, Europe has an opportunity to negotiate a more permanent truce. Perhaps calling Trump’s bluff, the European Union has made an opening offer for a “zero for zero deal,” a mutual elimination of all tariffs on industrial goods, a proposal that would address US complaints about European tariffs while also urging the United States to eliminate its own.

But the possibility of a broader and more muscular European response exists, should the trade conflict escalate. A whole new tool called the anti-coercion instrument could be used for the first time against the United States—targeting financial, digital, and other services and access to the European market. This tool has become known as the “EU bazooka” because of its wide scope of measures. Some EU member states are more trigger happy than others, but hopefully it is a weapon the European Commission will not use excessively or arbitrarily.

Following Trump’s “Liberation Day” tariff announcement on April 2, the European Commission said it would impose countermeasures on imported US goods in the form of tariffs of a value of $22 billion. The decision was a response to the global US tariffs on steel and aluminum of 25 percent, which remain in effect. Less than 24 hours later they were paused, as part of Trump’s 90-day pause on reciprocal tariffs, leaving them at a global level of 10 percent.

The European list of potential tariffs is longer than the one announced, but for the moment the European Union is hoping for a negotiation.

The fight over a diplomatic posting in Vilnius

The anti-coercion instrument (ACI) originated a few years ago, following Lithuania´s attempt to strengthen its ties with Taiwan. A Taipei diplomatic office opened in Vilnius in July 2021, and the Lithuanian Trade Representative Office opened in Taipei in November the same year. China condemned these steps as violating the One China principle. Beijing downgraded its diplomatic relations with Lithuania and imposed several trade measures, including import restrictions on Lithuanian commodities and increased customs inspections and delays for goods entering China. The Lithuanian economy suffered, and feeling isolated, the country asked for EU solidarity.

The incident led to the development of the anti-coercion tool, aimed at protecting EU member states from economic bullying and foreign pressure. Its existence prepares the European Union to respond in cases of intimidation and has been in force since December 2023. The instrument was designed to act as a deterrent with the hope that it would never have to be used.

Coercion is defined under the regulation as “a situation where a third country is seeking to pressure the European Union or a member state into making a particular choice by applying—or threatening to apply—measures affecting trade and investment.” Coercion would be established on a case-by-case basis by the European Commission and could be applied to any country. There have been questions about its compatibility with the World Trade Organization, but the Commission considers coercion as such as not addressed in the WTO Agreement. Therefore the ACI is regarded as legal. The jury is still out.

Reciprocity seen as coercion

To trigger the ACI, the European Commission needs to conduct an investigation that clarifies that there is indeed coercion from a specific country, and a qualified majority of member states can then adopt it along with proposed countermeasures. The ACI has so far never been activated. But even if no official investigation has been presented yet, it is clear that many EU member states view the US “reciprocal” tariffs as coercion. The European Commission has also made it clear that ACI is a tool it is prepared to use at a later stage.

The ACI has a vast scope in its application. It could introduce import and export restrictions on goods and services, quotas, licenses on financial services and intellectual property, and foreign direct investment. Moreover, it allows for broader restrictions on access to the EU market when it comes to public procurement bids, new customs duties, and stricter chemical and sanitary rules on imported goods.

Member states have different views of the value of using the instrument in the trade conflict with the Trump administration. France, Germany, and Spain are pushing the Commission to be ready to deploy it, whereas Ireland, where a lot of tech companies are based, is more cautious. It is widely believed that once in place, the measures would be hard to remove.

In a harbinger of its willingness to get tough, the European Commission will soon issue fines on Apple and Meta for violating EU antitrust rules and the EU Digital Markets Act. The upcoming fines are the result of a year-long investigation predating the latest trade conflict, but the White House is likely to view it as a hostile action, as they have several times criticized the European rules on digital and tech companies.

The anti-coercion instrument is potentially a powerful tool that could cause severe pain for American companies if imposed. The European Commission is wise to let its existence be known but should be in no hurry to deploy it. The Trump administration's trade policies are changing rapidly and could both escalate and deescalate. The EU Trade Commissioner Maros Sefcovic has been in Washington twice to explore US willingness to negotiate, but so far the administration has shown no interest in a deal that could eliminate tariffs on both sides. He is now planning a third trip.

The legal drafting required to trigger the ACI is key for precedence, and deploying it will most certainly escalate the trade conflict. The European Commission must also be careful not to cause too much damage to European citizens who use many US digital services that have as yet no viable European alternatives. It is therefore wise to keep the ACI in reserve for the time being, while waiting to see how the whole trade agenda of the US administration develops.

But wouldn't it be ironic if an instrument created to address unfair trade and coercion by China would for the first time be used against the United States?

A previously posted version of this piece referred incorrectly to the date of President Trump’s “Liberation Day” tariffs as April 9.

Correction: The European Commission said it would counter Trump's tariffs announced April 2 with tariffs on US goods of a value of $22 billion. An earlier version of this post incorrectly put the value at $22 million.