Over the weekend, US President Donald Trump threatened to impose tariffs on a set of countries that opposed any US takeover of Greenland. As the EU decides the best path forward, France has urged the bloc to use the Anti-Coercion Instrument (ACI). The tool has been called a “bazooka”, and could target both the EU’s trade with the US and US investments in Europe.
The ACI passed in 2023 but has never been used. The tool enables the bloc to pursue a set of detrimental trade measures aimed to deter ‘economic coercion’, in this case from the US.
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Per the EU’s explanation of the tool, measures could “include restrictions on the access to the EU market and other economic disadvantages for the third country involved”.
“The list of options is broad, and covers areas such as trade in goods, services, foreign direct investment [FDI], financial markets, public procurement, trade-related aspects of intellectual property rights, export controls, and more,” the bloc outlines. The targeting of public procurement contracts could particularly hurt US tech companies, which are heavily invested in the EU’s public digital infrastructure.
France suggested the activation of the tool after Trump said the US would impose tariffs on countries that have formally opposed US threats of taking over Greenland, which he sees as critical to US defence.
Trump said the tariffs would start at a 10% rate on 1 February and increase to 25% on 1 June if a resolution is not found. The targeted countries – which include some of the US’ closest historical allies – are Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the UK. Last week, many of these countries deployed troops to Greenland.
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By GlobalDataThe pros and cons of the anti-coercion instrument
The EU threatened to enact the ACI this past summer against the US amid trade deal negotiations, and later against China for threatening to restrict rare earth exports. The stakes this time are different, as Trump is threatening to breach European sovereignty.
“I don’t know what looks more like coercion than trying to steal part of your territory under duress,” Davide Oneglia, director for European and global macro at economic consultancy TS Lombard, tells Investment Monitor. “If they don’t use it now, people should be asking what this is for.”
However, Oneglia notes that the first line of defence will likely be the €93bn ($108.2bn) tariff package on a list of selected goods that the EU drafted last summer, as it underwent trade negotiations with the US. However, the ACI, he says, is still “clearly in the mix”.
Part of the ACI’s power, if enacted, is its broadness.
“It has been designed to be as broad as possible so that it could be adapted to the need of the moment,” Oneglia says. On other occasions where its use has been discussed, Germany and Italy have been the main opponents. Now, Germany seems to be changing its stance, with even its industrial leaders expressing support for the ACI.
“What makes it less powerful is that it is still relatively slow moving […] The other problem is that some of these countermeasures are not going to fall on European member states in the same way. Measures that hit service, tech and IP [intellectual property], for example, that is going to mostly impact Ireland and Luxembourg,” Oneglia says. “Europe has not figured out a mechanism to compensate or even out the losses that derive from the application of some of these measures. It is quite an important obstacle.”
Despite these obstacles, there is the sense that a breaking point has been reached. While the ACI is just one tool that the EU could potentially deploy, there is certainly a “higher probability of usage compared to this summer”, Oneglia says.
Trump wants Greenland, the “easy way” or “the hard way”
In the past, Trump’s tariff threats have mostly been about what the US sees as an imbalanced trade relationship with the EU. However, negotiating with the US regarding Greenland has proved to be difficult, as Trump has insisted on US control of the autonomous territory of Denmark. The president has said Washington would get the island “the easy way” or “the hard way”. European leaders have said a US military invasion of a Nato member’s territory would mean the end of the alliance.
The president told Norwegian Prime Minister Jonas Gahr Støre in a letter that after he was not awarded the Nobel Peace Prize, he no longer felt obligated to think “purely of peace”.
“Considering your country decided not to give me the Nobel Peace Prize, for having stopped 8 Wars PLUS, I no longer feel an obligation to think purely of Peace,” the letter read.
