Europeans are racing against the clock to agree on how best to respond to Donald Trump’s latest tariff threats, as the US president ramps up the pressure in his relentless bid to annex Greenland. But this time around, Europe appears poised to retaliate.
After weeks of renewed calls to acquire the semi-autonomous Danish territory — including openly discussing taking the island by force — Trump on Saturday menaced 10 European countries that have resisted his entreaties with a fresh 10% tariff rate. The new levies, set to come into effect at the start of February, would ostensibly come on top of existing US tariffs established in trade agreements Trump reached with the EU and UK last year. Trump said that 10% rate would rise to 25% by June if the EU fails to make a deal to sell Greenland.
The unexpected escalation, which has the potential to fully unravel NATO and the Western alliance, has left Europe squeezed between the prospect of further economic upheaval and an unprecedented threat from its closest ally over its territorial sovereignty.
“What is happening is, by any definition, the clearest and greatest form of coercion one could imagine,” said Ignacio García Bercero, a non-resident fellow at the Bruegel think tank and former director at the European Commission’s trade department.
"What we are facing is a fundamental threat to the territorial integrity of the European Union and to the very existence of the EU. In those conditions, if you don’t react, you might as well say, ‘we are not an actor internationally anymore,’” he added.
The EU spent much of last year trying to deescalate trade tensions with the US after Trump initially imposed a blanket 20% tariff on EU goods, resulting in a lopsided deal for the 27-nation bloc.
But the president’s Saturday announcement was a bridge too far.
“We are facing an existential challenge,” one European diplomat told The Parliament, asking to remain anonymous in order to speak candidly. He added that the EU is united in its determination to resist Trump’s pressure. “We can’t exchange sovereignty for economic interests,” he said.
The cascading situation is unfolding against the backdrop of the World Economic Forum’s annual event for business leaders and politicians in Davos, Switzerland. En route to the ski resort town in the Swiss alps overnight, Trump said he had a “very good” phone call with NATO Secretary-General Mark Rutte and reiterated his intent to acquire Greenland. “There can be no going back — On that, everyone agrees!” he wrote on Truth Social.
Meanwhile, Commission President Ursula von der Leyen addressed the Forum in Davos on Tuesday, urging Trump to abide by the trade deal reached last year. She called Greenland’s sovereignty “non-negotiable,” while warning of an “unflinching, united and proportional” response.
EU leaders are set to hold an emergency European Council summit on Thursday evening.
EU trade diplomacy’s final act
Trump’s latest trade salvo abruptly reopened a battleground Europeans had hoped was behind them.
Von der Leyen reached a deal with Trump in July that many analysts and officials viewed as a capitulation, accepting sweeping 15% tariffs on most EU goods. As part of the pact, the EU agreed to eliminate tariffs on all US industrial goods, while ramping up investment in the American energy and defence sectors.
And while many of Europe’s national leaders, including France’s Emmanuel Macron, have responded forcefully this week to Trump’s strong-arm tactics, the Commission is so far largely sticking to a familiar playbook.
“It’s clear… that the priority here is to engage — not escalate — and avoid the imposition of tariffs,” Olof Gill, a deputy spokesperson for the EU executive, told reporters on Monday.
But for many officials and analysts in Brussels, the Commission’s continued vows to seek dialogue in response to Trump’s threats now ring hollow — particularly as Trump has repeatedly made clear his disdain for America’s traditional allies since returning to office a year ago.
That contempt was articulated as official US policy late last year when the administration released its new National Security Strategy, describing Europe as a continent marked by a “loss of national identities and self-confidence” and facing “civilizational erasure.” The official document also outlined a spheres-of-influence approach to foreign affairs, by which the US would seek to dominate the Western Hemisphere by exercising raw power.
“There is no dialogue with this man,” David Kleimann, a Brussels-based trade expert said of Trump. “The only country that has played this game well was China,” he noted. After Washington slapped 104% on all imports from China last spring, Beijing was quick to retaliate with crippling levies, forcing the US to roll back its tariff rates to much lower levels.
Brussels’ trade defence arsenal
Should diplomacy fail, the EU has a range of options to choose from.
A €93 billion retaliatory package targeting goods originating from Republican-led US states appears to be the most straightforward response, analysts say. European leaders readied the countermeasures last year but then suspended implementation following the July deal between Von der Leyen and Trump.
Coincidentally, the six-month suspension was already set to expire on 7 February, which would allow the EU an easy opportunity to strike back by simply not extending the reprieve.
A far more potent retaliation, however, lies in the so-called trade “bazooka” — the EU’s Anti-Coercion Instrument (ACI). Adopted two years ago to deter economic blackmail by third countries, the mechanism is meant to hit where it hurts, restricting imports or exports of goods and services, or limiting foreign companies access to public procurement tenders on the continent. It can also be used to curb foreign direct investment and intellectual property rights.
At the same time, the instrument’s reputation is matched only by its elusiveness. It has, in fact, never been triggered before. The Commission — which oversees trade policy for all EU member states — has the authority to fire the bazooka, but has indicated it would only do so with a majority of support from national governments.
One European diplomat told The Parliament that France, Spain, Poland, Slovakia and Germany would back deploying the ACI, while countries including Italy, the Baltic states, Romania and the Netherlands are more sceptical.
But the ongoing debate over whether to hit back with the ACI is paralysing the EU’s ability to forcefully defend itself, analysts say.
“If we’re still deliberating whether to trigger or not the Anti-Coercion Instrument, then we are far behind the plans of this man,” Kleimann said of Trump. “We should have triggered it already last July at the very latest,” he added, calling appeasement a “self-defeating strategy.”
Similarly, Jonathan Hackenbroich, a former trade official at the Commission, suggested the EU would face a credibility crisis if it doesn’t respond with the tools at its disposal. “Not triggering the ACI in this situation could invite more economic coercion, in this or future situations,” he wrote on X.
The EU also has other cards to play, including selling off US Treasuries, reducing the bloc’s reliance on US defence equipment and threatening to close American military bases across the continent — none of which are particularly likely, nor effective short-term responses.
Meanwhile, across the pond, the US Supreme Court is set to release its ruling on the legality of Trump’s tariffs as early as Tuesday.
But as García Bercero put it: “Hope is not a strategy…at this point in time, you need to be forceful and you need to react quickly.”
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