FT: EU prepares tough response to Trump’s tariff gambit targeting big tech, financial services

The European Union is preparing to deploy retaliatory measures against Silicon Valley if Donald Trump follows through on threats to impose tariffs on the bloc.

This would mark the first use of Brussels’ so-called “anti-coercion instrument,” which could draw services into a potential trade war, Caliber.Az reports via Financial Times.

The European Commission is considering using this measure, originally crafted during Trump’s first term, in response to Washington’s actions. The ACI would allow the EU to target US service industries, including Big Tech, should the US impose tariffs on goods to compel policy changes. According to two officials familiar with the plans, “all options are on the table,” with the ACI seen as the most severe response without breaching international law.

The ACI, designed as a deterrent against China, enables the EU to impose trade restrictions on services when it believes tariffs are being used to force political concessions. Trump’s threats, including levying tariffs to coerce Denmark into handing over Greenland and pressuring the EU to ease enforcement against US tech firms, would likely qualify for the tool's application, officials said.

Dubbed a “bazooka” by some EU officials, the ACI, in force since 2023, allows the bloc to enact a broad range of retaliatory measures, such as revoking intellectual property rights or blocking commercial exploitation of services like software downloads and streaming. It can also restrict foreign investment or limit access to banking, insurance, and other financial services.

However, a second official warned that while the EU has experience managing tariffs on goods, it may be hesitant to extend a dispute into services and intellectual property rights. Trump recently confirmed his intention to impose tariffs on the EU, citing the bloc’s action against US tech companies and the large trade deficit in goods. He has not specified when these measures will take effect or whether the EU could negotiate a delay, as Canada and Mexico have.

EU trade ministers convened in Warsaw last Tuesday to discuss Trump’s threats. Sources familiar with the closed-door talks said that most ministers backed punitive action if necessary. Maroš Šefčovič, the EU's trade commissioner, expressed a desire to avoid tariffs but insisted: “If we are hit, we will react firmly.” Šefčovič also pointed out that the EU had a significant deficit with the US in services, despite enjoying a surplus in goods.

However, some EU member states are cautious about escalating a trade conflict amid weak economic growth. “We want to de-escalate,” said an EU diplomat involved in the discussions.

Any EU retaliation must be proportionate, and the European Commission must provide evidence of damage to EU industries. Approval from at least 15 of the 27 member states is also required. Such consultations can take several weeks; for example, retaliatory tariffs on the US in 2018 took three months to implement. In contrast, Canada and Mexico announced retaliatory measures within hours of the US decision to impose tariffs of up to 25%.

Trump later suspended tariffs on Canada and Mexico, citing commitments to tackle migration and drug trafficking.

Laurent Saint-Martin, France’s trade minister, said that, despite the ACI, the EU may need to adopt quicker retaliatory actions. “Speed is one of the key issues, we have to be ready faster than last time. We have to be more united and faster.” In 2018, Trump imposed tariffs of 25% on steel and 10% on aluminium, with the EU taking three months to approve its retaliatory measures on €2.8bn (over $2.9 billion) worth of US goods.

An EU diplomat added that the bloc could act swiftly in times of crisis, citing its rapid response to the Russian invasion of Ukraine and the Covid-19 pandemic.

By Aghakazim Guliyev