The Anti-Coercion Instrument: A Potential “Bazooka”

In response to escalating trade disputes, the European Union is contemplating the deployment of a powerful policy tool known as the anti-coercion instrument. This mechanism, adopted in 2023 with China in mind but never implemented, is viewed as a last resort option should discussions with the US administration fail to yield positive results.

This instrument is now being considered as Brussels plots its negotiating strategy. The EU aims to leverage its significant trade deficit in services with the US, which stands at approximately €110 billion, despite a significant trade surplus in goods.

Targeting tech Giants and Financial institutions

Brussels is considering adapting the anti-coercion instrument to specifically target prominent american tech companies and financial institutions. One proposal involves restricting American banks’ access to the EU’s vast public procurement market,estimated at roughly 2 trillion euros ($2.2 trillion) annually. This would effectively limit their involvement in significant infrastructure and service projects across the continent.

Another idea under consideration is to scrutinize the substantial annual investments made by Europeans in American companies, which amount to approximately €300 billion. EU officials have expressed concerns about this capital flow. Furthermore, the EU is exploring the possibility of increasing tax and regulatory burdens on American digital platforms operating within its borders.

EU’s Stance: “We Have the Power to Push Back”

the European Commission is signaling a firm stance in the face of perceived unfair trade practices. We have the power to push back, stated Ursula von der Leyen, the European Commission president, underscoring the EU’s determination to protect its economic interests.

This comes after the US imposed tariffs on aluminum, steel, cars and auto parts, moves that could seriously hobble the bloc’s shaky economy. Brussels responded by announcing that it would reimpose levies on U.S. imports like Harley-Davidson motorcycles, whiskey and other goods, some of which were targeted during the trans-Atlantic clash Mr. Trump instigated in his first term.

A Call for Strategic Deterrence

Fabrizio Pagani,a partner at the investment bank Vitale and a former top economic official in the Italian government,suggests a strategic approach to utilizing the anti-coercion tool. I personally think the big bazooka should be used first of all as a deterrent, he stated. So put it on the table, and let’s negotiate.

Potential Repercussions and Concerns

While the EU aims to protect its interests,some analysts and economists caution against overly aggressive negotiating tactics,fearing they could trigger unintended consequences.

Joachim Klement, the head of strategy at the investment bank Panmure Liberum, warns that Tariffs on services, just like tariffs on goods, hit consumers and businesses directly, adding that such measures could exacerbate the trade war. You are just putting fuel on the stagflationary fire, he added.

The anti-Coercion Instrument: A Potential “Bazooka”

In response to escalating trade disputes, the european Union is contemplating the deployment of a powerful policy tool known as the anti-Coercion Instrument (ACI). This mechanism,adopted in 2023 with China in mind but never implemented,is viewed as a last resort option should discussions with the US governance fail to yield positive results.

This instrument is now being considered as Brussels plots its negotiating strategy.The EU aims to leverage its significant trade deficit in services with the US, which stands at approximately €110 billion, despite a significant trade surplus in goods. ([policy.trade.ec.europa.eu](https://policy.trade.ec.europa.eu/enforcement-and-protection/protecting-against-coercion/qa-regarding-anti-coercion-instrument_en?utm_source=openai))

Targeting tech Giants and Financial Institutions

Brussels is considering adapting the Anti-Coercion Instrument to specifically target prominent American tech companies and financial institutions.One proposal involves restricting American banks’ access to the EU’s vast public procurement market,estimated at roughly €2 trillion ($2.2 trillion) annually. This would effectively limit their involvement in significant infrastructure and service projects across the continent.

Another idea under consideration is to scrutinize the considerable annual investments made by Europeans in American companies, which amount to approximately €300 billion. EU officials have expressed concerns about this capital flow. Furthermore, the EU is exploring the possibility of increasing tax and regulatory burdens on American digital platforms operating within its borders. ([policy.trade.ec.europa.eu](https://policy.trade.ec.europa.eu/enforcement-and-protection/protecting-against-coercion/qa-regarding-anti-coercion-instrument_en?utm_source=openai))

EU’s Stance: “we Have the Power to Push Back”

The European Commission is signaling a firm stance in the face of perceived unfair trade practices. We have the power to push back, stated Ursula von der Leyen, the European Commission president, underscoring the EU’s determination to protect its economic interests. ([ft.com](https://www.ft.com/content/19ee5f60-106c-4dd9-a55d-f7e4d36861b5?utm_source=openai))

this comes after the US imposed tariffs on aluminum, steel, cars, and auto parts, moves that could seriously hobble the bloc’s shaky economy. Brussels responded by announcing that it would reimpose levies on U.S. imports like Harley-Davidson motorcycles,whiskey,and other goods,some of which were targeted during the trans-Atlantic clash Mr. Trump instigated in his first term. ([ft.com](https://www.ft.com/content/19ee5f60-106c-4dd9-a55d-f7e4d36861b5?utm_source=openai))

A Call for Strategic Deterrence

Fabrizio Pagani, a partner at the investment bank Vitale and a former top economic official in the Italian government, suggests a strategic approach to utilizing the Anti-Coercion Instrument. I personally think the big bazooka should be used first of all as a deterrent, he stated. So put it on the table,and let’s negotiate. ([gide.com](https://www.gide.com/en/news-insights/the-anti-coercion-instrument-businesses-on-the-front-lines/?utm_source=openai))

Potential Repercussions and Concerns

While the EU aims to protect its interests, some analysts and economists caution against overly aggressive negotiating tactics, fearing they could trigger unintended consequences.

Joachim Klement, the head of strategy at the investment bank Panmure Liberum, warns that Tariffs on services, just like tariffs on goods, hit consumers and businesses directly, adding that such measures could exacerbate the trade war. You are just putting fuel on the stagflationary fire, he added. ([gide.com](https://www.gide.com/en/news-insights/the-anti-coercion-instrument-businesses-on-the-front-lines/?utm_source=openai))

Frequently Asked Questions (FAQ)

What is the Anti-Coercion Instrument (ACI)?

The ACI is a policy tool adopted by the European Union in 2023, designed to counteract economic coercion by third countries. it allows the EU to impose restrictions on trade in services,intellectual property rights,and foreign direct investment as a last resort. ([policy.trade.ec.europa.eu](https://policy.trade.ec.europa.eu/enforcement-and-protection/protecting-against-coercion/qa-regarding-anti-coercion-instrument_en?utm_source=openai))

How does the EU plan to use the ACI against the US?

The EU is considering adapting the ACI to target American tech companies and financial institutions by restricting their access to the EU’s public procurement market and increasing regulatory burdens on their digital platforms operating within the EU. ([policy.trade.ec.europa.eu](https://policy.trade.ec.europa.eu/enforcement-and-protection/protecting-against-coercion/qa-regarding-anti-coercion-instrument_en?utm_source=openai))

What are the potential consequences of the EU’s proposed measures?

Analysts warn that such measures could lead to increased costs for consumers and businesses, potentially exacerbating the trade war and contributing to economic stagnation. ([gide.com](https://www.gide.com/en/news-insights/the-anti-coercion-instrument-businesses-on-the-front-lines/?utm_source=openai))

Did You Know?

The European Union’s Anti-Coercion Instrument is a relatively new addition to its trade policy toolkit,reflecting a strategic shift towards more assertive responses to economic coercion by third countries. ([policy.trade.ec.europa.eu](https://policy.trade.ec.europa.eu/enforcement-and-protection/protecting-against-coercion/qa-regarding-anti-coercion-instrument_en?utm_source=openai))

Pro tips

For businesses operating in the EU, staying informed about potential trade policy changes is crucial. Engaging with industry associations and monitoring official EU communications can provide early insights into forthcoming measures that may impact operations. ([gide.com](https://www.gide.com/en/news-insights/the-anti-coercion-instrument-businesses-on-the-front-lines/?utm_source=openai))

Reader Question

How do you think the EU should balance protecting its economic interests with maintaining strong trade relations with the US? Share your thoughts in the comments below.