No Taco for Europe as it prepares to hit back, taking Trump’s new tariff threat seriously

As the European Union inches closer to securing a trade deal with the US, the bloc is planning to put all its cards on the table, including activating its most powerful trade tools against America.

More than half a dozen EU members have backed the French-led charge of deploying an “anti-coercion instrument (ACI)” in case talks between the two parties fail ahead of the August 1 deadline of lifting the pause on reciprocal tariffs. Trump has threatened a 30 per cent tariff rate on the bloc, which is its largest trading partner.

If all member states agree, the European Union would use the ACI for the first time ever, which could possibly unleash a wider transatlantic trade war, at a time when Trump tariffs have already kept the world economy on the edge.

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EU retaliatory options

Talking to Bloomberg, Benjamin Haddad, France’s minister for European affairs, said, “In this negotiation, you need to show strength, you need to show force, unity and resolve.

He added that the bloc could “go further” than the countermeasures previously announced by it, targeting almost €100 billion worth of US trade under the ACI.

There are some other ways that the bloc is planning to hit back at Trump’s retaliatory tariffs.

Taxes on US tech giants include new digital levies targeting American technology firms operating in Europe. Curbs on US investment involve targeted restrictions on US companies’ ability to invest within the EU.

Limited market access refers to excluding US firms from public procurement contracts or restricting their participation in key sectors. Additionally, tariffs on US goods are part of the EU’s response, with packages prepared that cover up to €93 billion worth of American products as potential targets for retaliatory duties.

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Posturing

While France is resolved to unravel the potential of ACI, some EU members have expressed scepticism with the chief, Ursula von der Leyen, saying that “the ACI is created for extraordinary situations” and “we are not there yet.”

Talks between the US and EU have continued, even after Trump threatened in a letter over the weekend to impose a 30 per cent tariff on most of the bloc’s exports starting next month, in addition to the existing 25 per cent duties on cars and car parts and 50 per cent tariffs on steel and aluminium.

Meanwhile, EU Commissioner Michael McGrath told Bloomberg that the bloc is expecting to reach a deal with the US by August 1, although leaders were “surprised and disappointed” to receive Trump’s letter.

The EU’s top trade negotiator, Maros Sefcovic, left for Washington on Wednesday for talks with his US counterparts. “Sefcovic is flying to DC this afternoon, for separate in-person meetings” with US Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer, said European Commission trade spokesman Olof Gill.