EU Unveils 'Trade Nuclear Weapon' to Counter Trump Tariffs
Brussels is preparing its potent 'Anti-Coercion Instrument' to retaliate against potential US protectionism under Donald Trump, targeting digital services, investment, and public procurement
- The European Union is prepared to use its new 'Anti-Coercion Instrument' (ACI), described as a "trade nuclear weapon," to counter potential economic coercion from a future US administration led by Donald Trump.
- This tool allows the EU to retaliate beyond traditional tariffs by targeting key American sectors, including services, investment flows, and access to the EU's €2 trillion public procurement market.
- Specific measures could include disqualifying bids from US firms for public contracts, targeting major digital service providers like Amazon and Microsoft, and restricting US foreign direct investment.
The European Union is poised to deploy its formidable 'Anti-Coercion Instrument' (ACI), a new trade defence mechanism likened to a "nuclear weapon," in the event of a trade dispute with a potential future US administration led by Donald Trump.
The bloc is specifically eyeing retaliation against key American service sectors, investment flows, product quotas, and US companies' participation in EU public procurement, should a comprehensive trade agreement prove elusive.
The ACI is primarily conceived as a deterrent, granting the EU's 27 member states sweeping powers to respond to what it deems as economic coercion by third countries like the United States.
Beyond traditional import tariffs on goods, this comprehensive tool allows for a broad spectrum of restrictive measures on both imports and exports, including the imposition of quotas or licensing controls.
In the substantial realm of EU public procurement, which accounts for approximately €2 trillion annually, Brussels has two potent options for reprisal:
Disqualification of Bids: Proposals found to utilise US goods or services for more than 50% of the contract's value – particularly in large-scale projects such as construction or defence procurement – could be entirely barred from the tendering process.
Disadvantageous Scoring: Bids from American firms could face "score penalties," significantly reducing their chances of securing contracts, even if otherwise highly competitive.
Furthermore, the ACI opens avenues for punitive measures impacting the services sector, an area where the US traditionally holds a significant trade surplus with the EU.
Digital service providers, including giants like Amazon, Microsoft, Netflix, and Uber, could be specifically targeted.
The instrument also allows for potential restrictions on foreign direct investment (FDI) originating from the US, currently the world's largest investor in the EU.
Additional retaliatory measures could include limiting intellectual property rights protection, restricting access to financial services markets, and imposing controls on the sale of chemicals or food products within the EU market.
The ACI was initially proposed in 2021, spurred by criticisms from EU member states regarding the perceived weaponisation of trade by the first Trump administration and China.
Beijing's actions against Lithuania, following the latter's decision to permit Taiwan to open a de facto embassy in Vilnius, served as a notable case study for the need for such a defence mechanism.
Under the new legislation, the European Commission is granted up to four months to assess whether a particular instance constitutes coercion.
If a foreign country's measure is confirmed as coercive, the Commission will then present its findings to EU member states, who will have a further eight to ten weeks to endorse the decision.
Such confirmation requires a qualified majority vote from member states, a higher threshold than for standard retaliatory tariffs.
Typically, the Commission would first engage in dialogue with the country in question, seeking to halt the coercive behaviour.
Should negotiations fail within a six-month period, the Commission can then propose EU countermeasures, which require renewed approval from member states and are expected to come into force within three months thereafter. While the entire process could extend up to a year, provisions exist for expedition in urgent cases.
