European Union governments are debating whether to deploy sweeping trade countermeasures against the United States as President Donald Trump warns of new tariffs tied to Greenland, while U.S. officials caution that retaliation would be unwise.
By yourNEWS Media Newsroom
European Union member states are weighing whether to activate a powerful trade retaliation mechanism that could impose roughly $108 billion in measures against the United States, as tensions escalate over President Donald Trump’s threat to levy steep tariffs on eight European countries if no agreement is reached on Greenland.
The discussion intensified after France urged the bloc to consider deploying the EU’s Anti-Coercion Instrument during an emergency meeting in Brussels on Sunday. The mechanism, often described as a trade “bazooka,” is designed to counter what the EU defines as economic coercion aimed at forcing policy changes that affect trade or investment, according to reporting by CNBC.
The Anti-Coercion Instrument would allow the EU to respond with a broad range of measures, including tariffs, restrictions tied to intellectual property rights, limits on public procurement, and other actions extending beyond traditional trade and financial responses. EU officials familiar with the framework have described its potential use as a “nuclear option.”
Speaking Tuesday in Davos at the World Economic Forum, U.S. Treasury Secretary Scott Bessent warned European governments against retaliation. Bessent said it would be “very unwise” for the EU to escalate in response to Trump’s tariff threats and urged countries and companies to “take the president at his word,” according to The Guardian.
Bessent pointed to last year’s tariff standoff between the United States and China, when Trump’s “liberation day” tariff announcement triggered sharp market volatility before multiple companies reached trade deals. He noted that markets later recovered to record highs in late 2025, aided in part by growth linked to artificial intelligence. “The worst thing countries can do is escalate against the United States,” Bessent said.
European unity on the use of the Anti-Coercion Instrument remains uncertain. Germany, whose economy is heavily dependent on exports, is among the countries expressing reservations. Carsten Nickel, deputy director of research at Teneo, told CNBC that some member states fear the economic consequences of invoking the tool could outweigh its benefits.
Industries seen as particularly exposed to potential U.S. tariffs include the automotive sector, with manufacturers such as BMW in Germany and Stellantis in Italy, as well as major pharmaceutical companies including Novo Nordisk and Roche, which have significant European footprints.
Despite internal divisions, pressure is mounting for a coordinated response. Germany and France on Monday called for a “clear” EU position on Trump’s threats, according to The Financial Times. German Finance Minister Lars Klingbeil said, “We will not be blackmailed.”
Three EU officials briefed on the discussions said European Commission staff have prepared multiple retaliation scenarios but are holding off on recommending activation of the Anti-Coercion Instrument in hopes that talks with Trump this week in Davos could produce a diplomatic off-ramp.
“Our number one priority now is to really engage and cooperate and have a good dialogue with U.S. counterparts,” European Commission Vice President Henna Virkkunen told the Financial Times. She added that while dialogue remains the focus, “we have also tools at our disposal here. We have prepared also for that.”
Virkkunen said the Anti-Coercion Instrument would also allow the EU to restrict access by American technology companies to the bloc’s internal market, emphasizing that the EU represents the largest market globally for some major tech firms.
European leaders are also seeking to defuse tensions by signaling a willingness to take on a greater security role in the Arctic. Denmark and Greenland have proposed a NATO mission on the island, modeled on alliance operations safeguarding critical infrastructure in the Baltic Sea, as a way to address concerns about Russian and Chinese activity in the region.
U.K. Prime Minister Keir Starmer said he would use the “full strength of government at home and abroad” to defend international law, calling Trump’s tariff threats “completely wrong.”
Financial markets have reacted sharply to the escalating rhetoric. Futures tied to the Dow Jones Industrial Average were expected to open Tuesday down 378 points. European equities declined broadly on Monday, while gold and silver rose to new highs after recently surpassing previous records.
The standoff coincides with heightened military activity in the Arctic. Denmark on Monday sent additional troops to Greenland, with Trump declining to rule out the use of military force to take control of the territory. Danish authorities said a “substantial contribution” of soldiers, along with the head of the Danish army, has deployed to Greenland, including to Nuuk and Kangerlussuaq.
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