How the European Union Plans to Respond to Trump's Tariff Threats

 

The European Union (EU) is preparing a strategic response to potential tariffs imposed by former U.S. President Donald Trump, who has threatened to introduce a 25% tariff on European products. In response, the EU may invoke its Anti-Coercion Instrument, a legal framework designed to counter economic pressure from third countries. This regulation, adopted in November 2023, gives the EU the power to retaliate against coercive trade measures.

Understanding the Anti-Coercion Instrument

The Anti-Coercion Instrument allows the European Commission to investigate whether foreign trade restrictions are being used as a form of economic coercion. According to Article 4 of the regulation, the Commission has up to four months to assess whether U.S. tariffs qualify as coercion. If proven, the EU can initiate countermeasures.

How the EU Defines Economic Coercion

According to Article 2, economic coercion occurs when a foreign government imposes trade measures to pressure the EU or its member states into changing their policies. In Trump's case, his remarks about using tariffs to influence NATO contributions or EU tax policies provide evidence of coercion.

Legal and Diplomatic Steps Before Retaliation

Once coercion is confirmed, the EU Council must approve the determination by a qualified majority (Article 5(5)). Before imposing countermeasures, the EU will attempt negotiation, mediation, or international arbitration (Article 6). If these efforts fail within a "reasonable timeframe," the Commission can take retaliatory action under Article 8.

Potential EU Countermeasures Against U.S. Tariffs

The Anti-Coercion Instrument provides a wide range of retaliatory measures, including:

• Targeted tariffs on U.S. goods
• Import and export restrictions
• Limits on access to EU public contracts
• Restrictions on financial services

A similar strategy was used in 2018, when the EU responded to Trump’s steel and aluminum tariffs by imposing duties on iconic American products such as Harley-Davidson motorcycles and Kentucky bourbon.

The Impact on Transatlantic Trade Relations

If Trump follows through on his threats, the EU’s response could escalate into a trade war. This would have significant consequences for both economies, affecting sectors like automobiles, technology, and agriculture.

For further analysis on the potential impact of Trump's tariffs on the EU economy, read this detailed report.

With the Anti-Coercion Instrument, the EU has a powerful tool to counter trade threats. If Trump's tariffs materialize, Europe is ready to act decisively, balancing legal measures with strategic retaliation to protect its economic interests.

For more on the EU’s preparation for U.S. trade policies, visit Le Point.