The 'trade bazooka' that France thinks could scare Trump
These were
the words of Danish Prime Minister Mette Frederiksen. She was reacting to US
President Donald Trump’s announcement that Denmark and seven other European
allies would be subject to additional tariffs for opposing his plan to annex
Greenland.
The US
president wrote on his social media platform Truth Social on Saturday: “World
peace is at stake! China wants Greenland and Denmark can’t do anything about
it.”
He also
announced that a 10% tariff would be applied to products coming to the US from
Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland.
This rate will increase to 25% in June and will remain in place until Danish
authorities agree to sell the Arctic island to them.😊
Trump made
the announcement at a time when the countries covered by the tariffs sent
troops to ensure the territorial security of Greenland.
Although the
governments of the affected countries have opened diplomatic contacts with the
US administration and have expressed their “willingness to engage in dialogue
based on the principles of sovereignty and territorial integrity,” some
countries have signaled that they are preparing for an unprecedented
confrontation with Washington.
They have
asked their counterparts in the European Union to activate the Anti-Economic
Coercion Instrument to respond to Trump’s “unacceptable” threat. The ACI is
also known as the “trade bazooka.”
A shield
against foreign pressure
The ACI was
approved by the European Union in 2023 and, according to the explanation on the
European Union's website, it is a 'weapon' for resolving trade disputes that
avoids conflicts from arising out of fear.
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This weapon
‘allows the Union to take countermeasures in addition to preventing third world
countries from taking measures against the interests of the Union.’
What do you
think those countermeasures could be?
The document
allows for the imposition of ‘trade restrictions such as higher tariffs, export
or import licenses, the provision of services, foreign direct investment or
access to government procurement’.
If France’s
request is approved, the EU could not only impose additional tariffs on
products coming to Europe from the United States, but also prohibit the United
States from buying shares in any company in the 27 member states, receiving
public or private financial assistance, and entering into government contracts
with these governments.
The ACI also
gives the EU the power to seek compensation from the country that is
pressuring.
China and
the US targeted
The ACI text
was designed to discourage third-world countries that “try to put pressure on the
EU or a member state by taking or threatening to take measures that affect
trade or investment.”
“It allows
us to react quickly to pressure from other countries,” said Bernd Langa, a
German MEP, after the regulation was approved. “We now have a variety of
countermeasures. Although the main purpose of the ACI is to prevent pressure,
we will also be able to defend the EU’s sovereignty if necessary.”
EU officials
began preparing the ACI shortly after Trump’s first term ended, when trade
relations on both sides of the Atlantic were at a standstill. But an incident
in 2021 affected Lithuania, after which preparations for the ACI gained
momentum.
That was the
year Lithuanian authorities announced plans to improve trade relations with
Taiwan, an island that China considers a “renegade province” and wants to
annex.
China
imposed trade sanctions on the Baltic country after Lithuania announced it
would improve trade relations with Taiwan.
The European
Parliament’s website states: “A few months after the announcement, Lithuanian
companies reported difficulties in concluding contracts with Chinese companies
or renewing existing contracts. They also faced problems such as being denied
permission to move goods at ports and having import applications rejected.”
At the time,
the EU defended the ACI’s approval, claiming that the WTO agreements do not
include “coercion” and that the WTO’s dispute settlement system could not
resolve disputes involving coercion or pressure.
Last year,
when Trump launched a global tariff war and targeted the European Union, the
application of the ACI was considered, but on this occasion Brussels resorted
only to dialogue.
Tiring
diplomacy
Before
calling for the activation of the ACI, Mekhwan had made his unease at Trump’s
announcement clear. He had said: “No intimidation or threats will affect us,
neither in Ukraine, nor in Greenland, nor in any other part of the world.”
In addition
to the French president, Irish Prime Minister Michel Martin also mentioned the
EU’s so-called “trade weapon,” saying “it could be considered for use.”
However, in
an interview with the Irish Public Broadcasting, Martin recommended trying the
path of dialogue first.
Other
European leaders, including the leaders of the countries Trump has threatened,
have also advocated diplomacy before preparing for a trade war with the United
States.
Norwegian
Prime Minister Jonas Gaard Stører told the Norwegian Broadcasting Corporation:
“We have to be very careful not to get into a trade war that gets out of
control. I don’t think anyone will benefit from it.’
Image of
containers with EU and US flags, Image source: Getty Images
, Image
captionEU-US trade exceeds $1.8 trillion in 2023
In 2023,
trade in goods and services between the EU and the US reached $1.8 trillion.
According to the European Commission, this means that $5 billion worth of goods
and services cross the Atlantic Ocean between the EU and the US every day.
In terms of
goods, the EU maintained a surplus of more than $170 billion. The surplus is
the money that a country saves by selling more than it buys.
That is, the
EU sells $170 billion more worth of goods to the US than it buys from the US.
While the US has a $120 billion advantage in services. These figures are from
the European Union.
Last July,
Washington and Brussels (the de facto capital of the European Union) reached an
agreement under which Washington reduced tariffs from 25 percent to 15 percent.
In return, Brussels promised to invest billions of dollars in the US in
industrial and defense sectors.
Now the
possibility of the agreement being frozen is also being considered.
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