EU readies response to Trump's tariffs with big tech action: FT

By Al Mayadeen English
Source: Financial Times
Today 15:02

The EU is considering a 'bazooka' strategy as its trade ministers back punitive measures if required.

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The European Union is preparing to retaliate against Silicon Valley if US President Donald Trump proceeds with his threat to impose tariffs on the bloc, potentially triggering a trade war involving services, the Financial Times reported.

The European Commission is considering using its "anti-coercion instrument" (ACI) in a possible dispute with the US, which would allow the EU to target US service industries, including Big Tech, FT reported, citing two officials familiar with the matter.

An official stated, "All options are on the table," pointing to the ACI as the strongest available response that does not violate international law.

Driving the news

The ACI, created during Trump's first term and later used as a deterrent against China, enables the EU to impose restrictions on trade in services if a country uses tariffs on goods to force policy changes.

Trump’s threats, such as using tariffs to pressure Denmark into giving up Greenland or to push the EU to drop enforcement actions against US tech companies, would qualify, according to officials.

The ACI, which came into effect in 2023, is called a "bazooka" by some EU officials. It gives the EU the ability to choose from a variety of retaliatory measures, including revoking intellectual property protections, restricting software downloads and streaming services, or blocking foreign direct investment and limiting access to financial services.

A second official warned, however, that while the EU is experienced with tariffs on goods, it may hesitate to expand the dispute to services and intellectual property rights.

Why it matters

Last week, Trump said he would "absolutely" impose tariffs on the EU, citing Brussels' actions against US tech companies and the large US trade deficit in goods. He did not provide specifics on when or whether negotiations would occur, similar to Canada and Mexico, which secured a reprieve.

EU trade ministers met on Tuesday in Warsaw to discuss Trump’s threats, with most ministers supporting punitive action if necessary.

Trade Commissioner Maros Sefcovic said as quoted by the Financial Times that he hoped to negotiate a way to avoid tariffs but emphasized, “If we are hit, we will react firmly.”

Sefcovic noted the EU’s large trade deficit with the US in services, despite enjoying a surplus in goods.

Some member states are cautious about escalating the situation, given weak economic growth. "We want to de-escalate," said an EU diplomat involved in the discussions.

What's next

Any retaliation would need to be proportionate, and the Commission must present evidence of damage to EU industries before seeking approval from at least 15 of the 27 member states. The approval process could take several weeks; the EU's last retaliatory tariffs on the US in 2018 took three months to implement.

In contrast, Canada and Mexico announced retaliatory measures within hours of Trump’s decision to impose tariffs up to 25%. Trump later suspended the tariffs, reportedly in exchange for commitments on immigration and drug trafficking.

Laurent Saint-Martin, France’s trade minister, told the Financial Times that the EU might need faster retaliation this time. "Speed is one of the key issues, we have to be ready faster than last time. We have to be more united and faster."

An EU diplomat noted that the bloc could act quickly in a crisis, referencing its rapid responses to the war in Ukraine and the COVID-19 pandemic.