- The EU is on the brink of using an “anti-coercion instrument” to fight off the potential 30% tariffs targeting its exports to the U.S.
- Several EU nations, including Germany and France, reportedly back the idea of imposing anti-coercion measures if a fair trade deal can’t be negotiated with the U.S.
- Established in 2023, the “Anti-Coercion Instrument” (ACI) has yet to be utilized by the EU.
The European Union is gearing up to make a bold move by deploying its “Anti-Coercion Instrument,” often d the ‘nuclear option’ aimed at preventing trade disputes, all while a looming 30% tariff on EU imports casts a shadow.
Diplomats from the EU mentioned that countries like France and Germany are exploring options for anti-coercion strategies aimed directly at the U.S., especially if they can’t strike a deal with President Trump. Reuters revealed these discussions happening this week.
These potential measures might block access for U.S. suppliers in European markets, limit their participation in public tenders, and impose restrictions on trade. Simply put, if push comes to shove, the EU is ready to respond aggressively to protect its interests as tensions with Trump escalate.
The White House has issued a clear warning: without a trade agreement by August 1st, a hefty 30% tariff on EU imports to the U.S. will kick in. Although they have stated the deadline is firm, some trade negotiations could still carry on post-deadline.
Understanding the ACI
Relations between the U.S. and Europe are pretty strained right now. Trump has continuously accused the EU of engaging in unfair practices due to its consistent trade surplus.
Data from the European Council indicates that trade across the Atlantic reached €1.68 trillion ($1.97 trillion) in 2024. While the EU enjoyed a trade surplus for goods, it logged a deficit for services with the U.S., ultimately resulting in an overall surplus of around €50 billion last year.
In the face of the impending 30% tariff threats, the EU’s game plan includes possibly imposing mutual tariffs on American imports, with the added consideration of their potent Anti-Coercion Instrument (ACI)—which, as previously noted, has never actually been activated.
The ACI aims to act against any perceived economic manipulation by countries deemed to employ coercive tactics against EU policies that could hurt trade and investment climates in Europe.
Its main goal? To deter coercion. According to the European Commission, if a third nation leverages these tactics, the EU is positioned to act through discussions and engagement, but harsh measures might be employed when dialogues fail. Learn more here.
This could involve not only retaliatory tariffs but also restrictions on imports and exports, intellectual property rights, or foreign investments.
The EU’s anti-coercion strategy could enable it to impose a wide range of limits on how U.S. entities access the European market, especially in labor-intensive sectors like food and chemicals.
Moreover, stuff like the ACI might influence U.S. services that already experience a surplus in the EU market, which includes significant companies such as Amazon, Microsoft, Netflix, and Uber.
It’s important to note that if the EU moves forward with these measures, they’ll need to be proportionate, targeted, and temporary—only in effect while coercive activities are ongoing.
The European Commission will require some time to go through possible coercion cases and gather confirmation from member states before taking action. They’ll need approval from at least 15 out of 27 countries before any ACI measures can roll out, and efforts will be made to discuss the issues with the involved countries first.
Furthermore, CNBC has reached out for additional insights from the European Commission and is awaiting replies.
A Last Resort Trade Strategy
Intensive negotiations are occurring to strike a deal on trade with the U.S., with the EU pushing for a standard 10% tariff compromise while seeking protection for pivotal sectors, such as automotive, agriculture, machinery, and aerospace.
As analysts from Eurasia Group pointed out, while the EU may accept a 10% tariff with certain exemptions for vital industries, any reciprocal rate exceeding 15% could trigger retaliation from the EU.
Though Trump’s considerable threat of doubling rates is thought more to be a negotiation tool rather than the actual goal for recovery, there’s still a strong likelihood that the EU will counteract U.S. exports worth approximately €116 billion as a form of leverage while considering deploying the ACI to target U.S. service exports, encouraging the administration to reach an agreement.
Using the ACI truly would resemble deploying a trade bazooka, a measure of last resort as explained by Eurasia Group’s analysts.
Though some EU nations, like France and Spain, push for a tough stance against Trump’s tariffs, the European Commission will likely focus initially on heavier tariffs for U.S. products.
If tensions flare, it would almost certainly lead to the planned deployment of more aggressive tactics through the ACI, using measures like export controls, procurement limits, and penalties on U.S. service exports as last resorts.
