From ‘trade bazooka’ to €93 billion tariffs: How the EU plans to counter Trump’s fresh tariff threat

• Trump to impose tariffs on EU nations backing Denmark over Greenland dispute
• EU considers activating its Anti-Coercion Instrument, the "trade bazooka"
• Escalating tariffs risk global economic disruption and strained US-EU relations

Did our AI summary help?

US President Donald Trump’s renewed attempt to assert control over Greenland has sparked a sharp transatlantic trade confrontation, after Washington announced punitive tariffs on several European nations backing Denmark.

Trump said the United States will impose a 10% tariff from February 1 on imports from Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the United Kingdom, with the rate set to rise to 25% from June 1 if no agreement is reached over Greenland.

The announcement led to emergency consultations among European Union leaders in Brussels, with French President Emmanuel Macron calling for the activation of the bloc’s Anti-Coercion Instrument, widely known as the EU’s “trade bazooka”.

"It's time to use the EU's 'trade bazooka' for the first time."

European Parliament leader Manfred Weber said, “The EPP is in favor of the EU-US trade deal, but given Donald Trump’s threats regarding Greenland, approval is not possible at this stage.”

“These actions really do represent an end to the credibility of American commitments. That’s going to have adverse effects on the world economy,” said Steven Durlauf of the University of Chicago.

This comes as EU ambassadors broadly agreed to step up efforts to dissuade US President Donald Trump from imposing tariffs on European allies, while simultaneously preparing retaliatory measures should the duties be implemented, diplomats said.

According to Reuters, the EU is also considering €93 billion in previously suspended retaliatory duties against the United States.

What is the EU’s ‘Trade Bazooka’?

The ‘trade bazooka’ refers to the European Union’s Anti-Coercion Instrument (ACI), adopted in 2023 to counter economic pressure from non-EU countries.

“It especially aims to deter the economic coercion of the Union or a Member State and to enable the Union, as a last resort, to counteract economic coercion through Union response measures.”

The ACI allows the EU to impose retaliatory tariffs, restrict market access for foreign companies, limit services trade, curb investment, and block participation in public procurement contracts.

Growing Economic Risks

Economists warn that escalating tariffs could weaken both the US and European economies, increasing business uncertainty and disrupting global supply chains.

European leaders issued a joint statement supporting Denmark and Greenland, warning that Trump’s measures could trigger a “dangerous downward spiral” in transatlantic relations.

European Commission President Ursula von der Leyen said, “Dialogue remains essential, and we are committed to building on the process begun already last week between the Kingdom of Denmark and the US.”

As negotiations remain uncertain, the standoff is emerging as the most serious US–EU trade dispute in years, raising the risk of a broader global trade conflict.

What to look forward in Davos? 

European Council President Antonio Costa said in a post on social media that consultations among EU members reflected strong unity in backing Denmark and Greenland, along with a shared resolve to resist any form of coercion.

Danish Foreign Minister Lars Lokke Rasmussen, speaking during a visit to Oslo, said Denmark would continue to prioritise diplomacy, referring to the agreement reached this week between Denmark, Greenland, and the US to establish a working group.

“The U.S. is also more than the U.S. president. I've just been there. There are also checks and balances in American society,” he said.

The European Union’s emphasis on dialogue is expected to feature prominently at the World Economic Forum in Davos, where Trump is scheduled to deliver a keynote address on Wednesday, marking his first appearance at the event in six years.