What is the European Union’s ‘trade bazooka’ that France wants to use against Trump for threats about Greenland

The Greenland crisis: Europe holds emergency meeting on Donald Trump’s tariffs “Europe will not be blackmailed.” With these words, Danish Prime Minister Mette Frederiksen responded to US President Donald Trump’s announcement that he intends to impose additional tariffs on eight European countries that oppose the American plan to annex Greenland. “World peace is at stake! China wants Greenland and Denmark can’t do anything about it,” Trump declared on Saturday (17), on the social network Truth Social. In the post, the American stated that products imported from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland will be subject to a 10% tariff from February 1st. The tax will rise to 25% on June 1 and will remain at that level until Danish authorities agree to sell the Arctic island, the Republican said. Trump made the announcement days after the sanctioned countries sent a military mission to Greenland to reinforce the territory’s security. Although the governments of the affected countries have initiated diplomatic contacts with the American government and expressed their “willingness to dialogue based on the principles of sovereignty and territorial integrity”, some have signaled that they are preparing for an unprecedented confrontation with Washington. And proof of this is the request of French President Emmanuel Macron, who asked the other presidents of the European Union (EU) to activate the Instrument against Economic Coercion (ACI), known as the “commercial bazooka”, in response to the threat considered “unacceptable” by Trump. Trump reacted angrily to the decision of eight European countries to send troops to Greenland AFP via BBC A shield against foreign pressure The ACI was approved by the EU in 2023 and is a “deterrent” weapon for resolving commercial disputes, as the European Parliament website explains. In addition to seeking to “dissuade third countries from exercising coercive measures against the Union’s interests”, the instrument “ultimately allows for the application of retaliatory measures”. What retaliatory measures does he envisage? The instrument authorizes “the imposition of trade restrictions, in the form, for example, of higher tariffs, import or export licenses, restrictions on trade in services or restrictions on access to foreign direct investment or public tenders.” If the French request is approved, the EU could not only impose additional tariffs on US imports, but also prevent American companies from buying shares in companies in any of its 27 Member States, receiving public or private financing, and bidding for public contracts with their governments. Furthermore, the ACI authorizes the EU to demand financial “reparations” from the country that exercises coercion against it. Several European leaders have assured that there will be a coordinated response to Trump’s threats Getty Images via BBC With China and the US in the crosshairs The text was designed to discourage third countries from “trying to pressure the EU or a Member State to take a specific decision, applying, or threatening to apply, measures that affect trade or investment.” “This instrument allows us to react quickly to pressure from other countries,” said German MEP Bernd Lange after the legislation was approved. “We now have a wide range of countermeasures, completing the set of defensive tools at our disposal. While the main objective is deterrence, we will also be able to act, if necessary, to defend the Union’s sovereignty,” the German lawmaker added. EU authorities began drafting the ACI shortly after the end of Trump’s first term, a period in which transatlantic trade relations suffered several setbacks. However, it was an incident involving Lithuania in 2021 that finally pushed the initiative forward. That year, China imposed trade restrictions on the Baltic country after its authorities announced that they would improve trade relations with Taiwan, an island that the Asian giant considers a “rebellious province” and seeks to annex. “A few months after the announcement, Lithuanian companies reported difficulties in renewing or signing contracts with Chinese companies. In addition, they had problems with unreleased shipments and the refusal of import orders,” notes the European Parliament website. At the time, the EU justified its approval of the ACI by arguing that “coercion” is not addressed in World Trade Organization (WTO) agreements and therefore cannot be resolved through the WTO’s dispute settlement system. Last year, when Trump launched his global tariff war and targeted the EU, the possibility of applying the instrument was explored. However, on that occasion, Brussels simply chose to resort to dialogue. The EU approved its Instrument against Economic Coercion to prevent China and the US from influencing its decisions with tariffs and other threats Getty Images via BBC Exhausting diplomacy Before requesting the activation of the ACI, Macron had already made clear his dissatisfaction with Trump’s announcement. “No intimidation or threat will influence us, not in Ukraine, not in Greenland, not anywhere else in the world,” he declared. In addition to the French president, another European leader who spoke out about the EU’s so-called “trade bazooka” was the Irish Prime Minister, Micheál Martin, who reiterated on Sunday (18) that the instrument “is on the table”. However, in an interview with the Irish public broadcaster, Martin defended that all avenues of dialogue must first be exhausted. Other European leaders, including those from some of the countries threatened by Trump, also advocated diplomacy before preparing for a trade battle with the US. “We must be very careful not to get into a trade war that gets out of control. I don’t think anyone benefits from this,” Norwegian Prime Minister Jonas Gahr Stoke told Norwegian broadcaster NRK. In 2023, trade between the EU and the US exceeded US$1.8 trillion Getty Images via BBC Trade in goods and services between the European Union and the US reached US$1.8 trillion (R$9.7 trillion) in 2023. This means that, every day, goods and services worth US$5 billion cross the Atlantic between the EU and the US, according to the European Commission. In terms of goods, the EU recorded a surplus of more than US$170 billion, while in terms of services, the USA came out the winner, with almost US$120 billion, according to the same data from the European Union. Last July, Washington and Brussels reached an agreement. The first agreement reduced tariffs from 25% to 15% in exchange for the European Union’s commitment to invest billions of dollars in the US industrial and defense sectors. The possibility of freezing this agreement is also under discussion. Ambassadors from the 27 EU countries held an emergency meeting on Sunday to review the situation and assess next steps. Macron called on the EU to take retaliatory measures against the US if Trump follows through on his threat to impose additional tariffs AFP via BBC

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