What can the EU do against Trump's trade war?
In the emerging trade war with the US, Brussels is treading a delicate balance of trying to look strong, while also keeping its traditional ally on side
US President Donald Trump claims tariffs is his "favorite word." Across the Atlantic, meanwhile, the European Commission has described Trump's trade policy as "an act of economic self-harm," and is preparing its response.
In the emerging trade war with the US, Brussels is treading a delicate balance of trying to look strong, while also keeping its traditional ally on side.
The EU's top trade official, Maros Sefcovic, believes Trump could impose a sweeping 20% tariff on all EU goods imported into the US by early April, significantly increasing the cost of European products. It still remains unclear whether the US will target individual countries or the EU as a bloc.
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Any new tariffs would be in addition to the 25% tariffs already imposed on EU steel and aluminum imports, as well as separate tariffs on the European automotive sector that have been implemented over the past few months.
The EU has several tools at its disposal as it balances having a consequential response, while minimizing the impact and disruption to its own citizens and consumers.
Restrictions on services
The EU Commission may consider a significant escalatory move by targeting the US service sector. This could involve restricting intellectual property rights for US companies operating in the EU.
For instance, the EU might limit companies like Apple and Google from charging for cloud-storage services or operating-system updates. There is also discussion about preventing Elon Musk's Starlink satellite network from competing for European government contracts.
In terms of trade, the EU had a significant goods surplus with the US, valued at €157 billion ($170 billion) in 2023, meaning it imports more from the US than it exports. However, in services, the US recorded a surplus, tilting the balance with a €109 billion gain for the EU.
Europe's retaliatory tariffs to date have been largely symbolic, targeting American-made products like Harley Davidson motorcycles and denim jeans. With those products already affected, new tariffs would need to target other sectors.
All retaliatory measures require agreement from a qualified majority of EU countries, complicating the political landscape in Brussels. For example, France has called for a suspension of tariffs on bourbon whiskey to protect its wine sector from potential US retaliation.
The EU's anti-coercion instrument
A critical issue is whether Brussels will utilize the EU's Anti-Coercion Instrument (ACI) — a mechanism created in 2023 in response to China's block on Lithuanian imports over its support for Taiwan.
The ACI, referred to as Europe's "trade bazooka," offers a broad range of tools for the EU if it determines Trump's trade approach amounts to "economic coercion."
It could even allow the EU to restrict US banks operating in the bloc, revoke US patents, or limit revenue access for online streaming services.
Using the ACI has been advocated by prominent figures in European trade, including former EU Trade Commissioner Cecilia Malmström, and Ignacio García Bercero, who previously led the EU side of the EU-US trade negotiations during the Obama era.
Under the ACI, there is scope to target "natural or legal persons connected to the government," potentially affecting figures close to Trump, such as Elon Musk.
Targeting US Big Tech
In addition to tariffs, there is discussion of enforcing other EU laws to target major US tech companies. Experts suggest the EU could impose strict penalties under the Digital Services Act (DSA) and Digital Markets Act (DMA), such as hefty fines for social media platforms that fail to promptly remove disinformation.
The EU is already investigating the promotion of far-right content during European elections on Musk's platform X and could pursue this vigorously.
Trump's administration and its allies have frequently argued that EU laws like the DMA and DSA function as tariffs on US tech firms due to the financial burdens they create.
The EU might also leverage the ACI to ban the sale of advertisements on X, prohibit paid subscriptions, and prevent public authorities from posting information there.
Many economists and trade experts do warn, however, that such measures against US tech giants could significantly escalate tensions between the EU and the US and negatively impact European citizens.
