The author is a Reuters Breakingviews columnist. The opinions expressed are his own.
By George Hay
LONDON, Jan 19 (Reuters Breakingviews) - Another day, another social media threat regarding potentially deadly tariffs from Donald Trump. The United States president’s warning on Saturday of 10% levies on imports from those European countries that have deployed troops to Greenland is as shocking as a separate announcement last Monday to implement 25% charges on countries doing business with Iran. While it looks like an acid test of the continent’s unity, there’s a clear way to pass it.
As with the Iran tariffs, Trump’s Truth Social post on Europe has yet to be followed up by a formal Executive Order with critical details on what any new strictures would cover. His propensity to fire off trade threats using the International Emergency Economic Powers Act could also conceivably be curtailed by a keenly-anticipated U.S. Supreme Court ruling that may come on Tuesday. However farcical it all is, European leaders have to take him seriously.
Unlike last year’s three-month soap opera that eventually in July saw European Commission President Ursula von der Leyen acquiesce to a 15% tariff on U.S. imports from the EU, Trump’s latest salvo targets individual states like Germany, France and Denmark who have resisted his assertion that Washington should annex the latter's autonomous territory Greenland. That risks a Doomsday scenario where unaffected EU states like Spain and Italy try to stay in Trump’s good books by voting against strong bloc-wide countermeasures – thus splintering the union.
Beyond the fact it’s hard to enforce tariffs in only parts of a single market - and that Trump’s measures could hike domestic inflation just as U.S. mid-term elections loom - Von der Leyen nevertheless has some cards of her own. Targeting Paris and Berlin as well as Copenhagen is arguably easier to manage than if only the latter was earmarked for tariffs. Even if Rome, Madrid and others demur, she could probably still win a vote on the deployment of retaliatory measures under so-called qualified majority voting that doesn’t require unanimity. And it’s pretty obvious what they could be.
The Anti-Coercion Instrument $(ACI)$, in the EU’s back pocket since 2023, allows it to respond to naked attempts to bully individual members with bloc-wide curbs on a wide range of trade, including services. An obvious place to deploy it would be on the exports of U.S. companies like Big Tech, which supported a 148-billion-euro U.S. services surplus with the EU in 2024 – the inverse of the EU’s 198-billion-euro goods surplus with Washington.
Von der Leyen hasn’t deployed the ACI before, so may not need to specify exactly how she will use it. But given the process would take time to implement, it may be enough to just officially activate it. The ACI could then be used in earnest if Trump is not deterred by $100 billion of tariffs on U.S. goods which may now kick in after a waiver expires on February 7. The argument not to reach for the ACI - that this is a tool only to be used in exceptional circumstances – begs the question of what the current ones are.
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CONTEXT NEWS
Major European Union states including Germany and France decried U.S. President Donald Trump's tariff threats over Greenland as blackmail on January 18, as France proposed responding with a range of untested economic countermeasures.
Trump vowed on January 17 to implement a wave of increasing tariffs on EU members Denmark, Sweden, France, Germany, the Netherlands and Finland, along with Britain and Norway, until the U.S. is allowed to buy Greenland. He said the levy would start at 10% from February 1, rising to 25% on June 1 “and payable until such time as a Deal is reached for the Complete and Total purchase of Greenland”.
All eight countries, already subject to U.S. tariffs of 10% or 15%, have sent small numbers of military personnel to Denmark's vast Arctic island, as a row with the United States over its future escalates.
"Tariff threats undermine transatlantic relations and risk a dangerous downward spiral," they said in a joint statement.
Meanwhile, a source close to Emmanuel Macron said the French president was pushing to activate the Anti-Coercion Instrument, which could limit access to public tenders, investments or banking activity or restrict trade in services, in which the U.S. has a surplus with the bloc, including digital services.
The European Parliament looks likely now to suspend its work on the EU-U.S. trade deal. It had been due to vote on removing many EU import duties on January 26 and January 27, but Manfred Weber, head of the European People's Party, the largest group in parliament, said late on January 17 that approval was not possible for now.
The EU has a trade surplus with the US in goods, but a deficit in services https://www.reuters.com/graphics/BRV-BRV/gkplqznlrvb/chart.png
(Editing by Neil Unmack; Production by Shrabani Chakraborty)
((For previous columns by the author, Reuters customers can click on HAY/george.hay@thomsonreuters.com))
