The European Union is assessing its approach to the expected new tariffs that will be implemented by the U.S. administration. However, what resources does it possess?
The US President, Donald Trump, says that his favorite term is ‘tariffs.’ On the other side of the Atlantic, however, the European Commission characterizes Trump’s trade strategy as an “act of economic self-harm” and is getting ready with their response.
Amid the escalating trade conflict with the United States, Brussels is carefully navigating a path that aims to appear resilient while simultaneously maintaining solidarity with its long-standing partner.
Maros Sefcovic, the leading EU trade representative, thinks President Trump might introduce a broad 20% tax on every product coming from the EU to the United States by early April, substantially raising the expense of European items. The situation is uncertain regarding whether the U.S. plans to focus on specific nations within the EU or address the union collectively.
Any additional tariffs would be on top of the 25% duties already levied on European Union steel and aluminum imports, along with distinct tariffs on them.
European automotive sector
those that have been put into practice over the last several months.
The European Union possesses various means at its fingertips as it seeks to strike a balance
delivering an impactful reaction, all while reducing the effect and disturbance to its residents and buyers.
Restrictions on services
The European Union Commission might contemplate making a substantial escalation by focusing on the U.S. service industry. This potential action could include limiting intellectual property protections for American businesses active within the EU.
For example, the EU could restrict firms such as Apple and Google from imposing charges for cloud storage services or updating their operating systems. Additionally, there is talk of stopping Elon Musk’s company
Starlink satellite network
From vying for European government contracts.
Regarding trade, the European Union maintained a substantial goods surplus with the United States amounting to €157 billion ($170 billion) in 2023, indicating that imports from the U.S. exceeded exports. Nevertheless, in the sector of services, the U.S. saw an advantage, resulting in a net benefit of €109 billion favoring the EU overall.
Europe’s
retaliatory tariffs
So far, they have mainly had a symbolic impact, focusing on goods such as American-manufactured items including Harley-Davidson motorcycles and Levi’s jeans. Since these products are already impacted, additional tariffs would need to address different industries.
Every form of reciprocal action necessitates approval from a qualified majority within the European Union member states, thereby complicating the political environment in Brussels. As an illustration, France has proposed halting duties on bourbon whiskey as a means to shield its wine industry from possible countermeasures by the United States.
The EU’s anti-coercion instrument
A crucial question is whether Brussels will employ the EU’s Anti-Coercion Mechanism (ACI), which was established in 2023 as a countermeasure against coercion.
China’s block
On Lithuanian imports regarding its backing of Taiwan.
Referred to as Europe’s “trade bazooka,” the ACI provides a wide array of instruments for the EU should it decide that Trump’s trade tactics equate to “economic coercion.”
This might enable the EU to constrain US banks functioning within the territory, rescind US patents, or cap income flow for web-based streaming platforms.
The use of the ACI has been recommended by key players in European commerce, such as the former EU Trade Commissioner Cecilia Malmström, and Ignacio García Bercero, who was responsible for leading the EU team in the US-EU trade talks under President Barack Obama’s administration.
Within the framework of the ACI, there is room to aim at “either natural or legal entities associated with the government,” which could impact individuals closely linked to Trump, like Elon Musk.
Targeting US Big Tech
Besides tariffs, talks are also focusing on applying additional EU regulations to address issues with prominent U.S. technology firms. According to experts, the European Union might enforce severe consequences through the Digital Services Act (DSA) and Digital Markets Act (DMA). This includes imposing significant financial penalties on social networking sites that do not swiftly eliminate misinformation.
The European Union is currently conducting an investigation
the increase in far-right propaganda during the European elections on Musk’s platform X
and could actively pursue this.
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 European Union could potentially use the ACI to restrict ads on X, stop paid subscriptions, and bar public officials from sharing information there.
However, numerous economists and trade specialists caution that implementing these measures against American technology corporations might heighten tensions considerably between the EU and the United States, potentially leading to adverse effects for European residents.
Edited by: Uwe Hessler
Author: Jack Parrock
