EU Weighs Anti-Coercion Instrument Amid US Trade Threats

As transatlantic trade tensions escalate, the European Union faces a critical juncture, prompting calls for a more assertive defense of its economic interests. Recent rhetoric and actions from the United States have intensified the debate within the EU regarding the most effective strategy to counter perceived economic coercion, with a particular focus on activating a recently adopted anti-coercion instrument.

• Former U.S. President Donald Trump has threatened substantial 30% tariffs on EU imports, building on existing duties of 50% on steel and aluminum, 25% on automobiles, and 10% on other selected imports.
• The EU has prepared retaliatory measures, including a suspended €21 billion list and a pending €72 billion list, potentially totaling €93 billion in counter-tariffs.
• Jean-Luc Demarty, former Director-General of the European Commission’s DG Trade, has strongly advocated for activating the EU’s anti-coercion instrument, labeling the U.S. approach as “extortion.”
• Adopted in 2023, the anti-coercion instrument allows the EU to restrict participation in public procurement, limit licenses, and impose restrictions on trade in services and intellectual property rights, moving beyond conventional tariffs.
• Demarty proposes strategically targeting U.S. digital and financial sectors to rebalance asymmetric trade dynamics, asserting this requires significant political courage from EU leaders.

Trade friction between the United States and the European Union has escalated, primarily fueled by former U.S. President Donald Trump’s threat of imposing a significant 30% tariff on EU imports should a new trade agreement not materialize. These threats compound existing U.S. tariffs, including 50% on EU steel and aluminum, 25% on automobiles, and 10% on other selected imports, which have been in effect since mid-March. In response, the EU has prepared planned retaliatory measures, including a suspended list valued at €21 billion and a pending list worth €72 billion, potentially totaling €93 billion in counter-tariffs.

Amidst these developments, Jean-Luc Demarty, formerly Director-General of the European Commission’s DG Trade, has become a vocal proponent of a more robust EU stance. Demarty has characterized the U.S. approach as “extortion,” asserting that conventional tariff negotiations are improbable to yield a balanced or equitable outcome. He proposes that beyond the outlined retaliatory tariffs, the EU should activate its recently adopted anti-coercion instrument. This strategic deployment, he suggests, would unequivocally signal the EU’s determination to leverage its full array of tools against what it perceives as coercive trade strategies.

The Anti-Coercion Instrument: A New Dimension in Trade Defense

The anti-coercion instrument, formally adopted by the EU in 2023, represents a significant escalation capability within the Union’s trade defense arsenal. Unlike conventional tariffs that primarily target goods, this mechanism allows the EU, once coercion by a third country is formally established, to impose broader restrictions. These can include limiting participation in public procurement tenders, restricting licenses, and imposing barriers on trade in services and intellectual property rights. Demarty’s strong advocacy for its immediate activation contrasts with initial assessments from Commission President Ursula von der Leyen, who suggested the situation had not yet warranted its use.

For Demarty, the inherent limitations of exclusively targeting goods in a comprehensive trade dispute necessitate a strategic pivot towards the services sector. He argues that relying purely on goods-based retaliation risks inadvertently harming the EU by impacting essential imports. Therefore, measures specifically targeting U.S. digital and financial sectors are crucial to rebalance the asymmetric trade dynamic. This aggressive approach, he emphasizes, necessitates considerable political fortitude from EU leaders, characterizing it as an “existential political moment” for the Union’s credibility and its prospective geopolitical standing.

The strategic deployment of the anti-coercion instrument, according to Demarty, holds implications extending beyond the immediate dispute with the United States. He posits that demonstrating the capacity to employ such powerful tools would serve as a significant deterrent against similar coercive actions from other global powers, notably China. While acknowledging that such measures would entail costs for the EU, Demarty contends that the impact on the United States would be disproportionately greater, potentially compelling the U.S. administration to reconsider its aggressive trade posture.