The EU's anti-coercion instrument is a powerful tool designed to counter economic coercion from third countries, particularly the US and China, as they assert their national interests through tariffs and resource weaponization. This tool, adopted in 2023, defines economic coercion as a third country's actions that impact trade or investment, aiming to influence the EU or a member state's decisions. President Trump's threat of tariffs on Denmark for Greenland's sale exemplifies this scenario. The instrument is likened to a 'trade bazooka,' a potent response mechanism. The EU's previous consideration of retaliation against US tariffs on Liberation Day, though ultimately not implemented, highlighted the potential of this tool. The anti-coercion instrument grants the EU the ability to restrict access to the European single market, impacting 500 million consumers, and limit trade licenses and public procurement access for American services. Establishing coercion requires a thorough assessment by the European Commission, followed by a decision from EU member states by qualified majority. If activated, negotiations with the country in question commence, and failure may lead to broader countermeasures beyond tariffs. The tool's implications are significant, requiring any response to be 'proportionate and not exceeding the level of injury to the European Union.' The EU's hesitation to use this instrument stems from its untested nature and the potential impact on transatlantic relations. The bloc fears that strong measures against the US could backfire, damaging NATO and discussions around Ukraine's peace settlement. The EU has also considered the anti-coercion instrument in response to China's export licensing weaponization of rare earths and critical minerals. The bloc's preference for dialogue over coercion reflects its cautious approach. The current scenario with President Trump's threat may prompt the EU to activate the instrument, potentially triggering a new trade war. This decision could be influenced by the EU's solidarity with Denmark and Greenland, and the need to defend a member state's sovereignty. The outcome remains uncertain, but the EU's response will significantly impact the transatlantic relationship and global trade dynamics.
