What is EU's 'trade bazooka' against Trump's new tariff threat?
What's the story
US President Donald Trump's renewed interest in acquiring Greenland has sparked a major trade confrontation with the European Union (EU). The US recently announced tariffs on imports from Denmark, Finland, France, Germany, Netherlands, Norway, Sweden and the United Kingdom. The move triggered emergency talks among EU leaders in Brussels. French President Emmanuel Macron has called for invoking the bloc's Anti-Coercion Instrument (ACI), commonly referred to as the EU's "trade bazooka."
Retaliation measures
EU's response to US tariffs
In response to the US tariffs, EU ambassadors have broadly agreed to ramp up diplomatic efforts to dissuade Trump from imposing these duties. They are also preparing retaliatory measures if the tariffs are implemented. The EU is reportedly considering €93 billion in previously suspended retaliatory duties against the United States. This could be a significant counteraction against Trump's trade policies, potentially escalating the transatlantic trade confrontation further.
ACI explained
Understanding the EU's 'trade bazooka'
The 'trade bazooka' is a term for the EU's ACI adopted in 2023 to counter economic pressure from non-EU countries. The ACI enables the EU to impose retaliatory tariffs, restrict market access for foreign companies, limit services trade, curb investment and block participation in public procurement contracts. It is an important tool for the EU to respond to economic coercion by other countries.
Economic risks
Potential economic impact of escalating tariffs
Economists have warned that the escalating tariffs could hurt both the US and European economies, creating uncertainty for businesses and disrupting global supply chains. European leaders have issued a joint statement backing Denmark and Greenland, warning that Trump's actions could lead to a "dangerous downward spiral" in transatlantic relations. The standoff is shaping up to be one of the most serious US-EU trade disputes in years, raising fears of a wider global trade war.
Diplomatic efforts
EU's commitment to dialog amid trade tensions
European Commission President Ursula von der Leyen stressed the importance of dialog and expressed commitment to continue discussions between Denmark and the US. European Council President Antonio Costa said consultations among EU members showed strong unity in support of Denmark and Greenland, as well as a common determination to resist any form of coercion. The EU's focus on dialog will be a key theme at the World Economic Forum in Davos, where Trump will deliver a keynote address on Wednesday.