French President Emmanuel Macron recently announced that he will ask the European Union to activate Europe’s "trade bazooka" in response to Trump’s Greenland‑related tariffs.
France argued that the US measures amount to economic coercion, while some other EU governments, notably Germany, are said to favour keeping the bazooka as a deterrent and moving more cautiously before actually triggering it.
So, what is this "trade bazooka"?
The EU's "trade bazooka" refers to a powerful new rule called the Anti-Coercion Instrument (ACI), which came into effect in late 2023 to help Europe fight back when other countries use economic pressure to force political decisions.
It's now making headlines because of a growing spat between US President Donald Trump and several European nations over the future of Greenland, an Arctic territory rich in minerals and a strategic location.
British Prime Minister Keir Starmer also called a press conference following the Trump tariff threat, stating that such duties should not be used against allies. The UK leader, however, asserted that his focus was to avoid a "tariff war" over Greenland.
How the Trade Bazooka works
Think of the ACI as Europe's big stick for trade fights. If a foreign government—like the US—imposes tariffs, blocks investments or restricts services to bully Europe into giving political concessions, the EU can hit back hard.
Possible responses include slapping extra duties on imports, barring US companies from EU government contracts, limiting American investments, or even cutting off access to EU markets for services where the US earns big profits.
Unlike regular trade disputes handled by the World Trade Organization, the ACI is faster and broader, designed specifically for cases where economics meets politics. EU leaders can activate it after a vote, and it's meant as both a shield and a bargaining chip.
Trump's Greenland push is the trigger
The current flashpoint started when Trump threatened to add 10 per cent tariffs from February 1 on goods from Denmark, France, Germany, the UK, Netherlands, Sweden, Norway and Finland—on top of existing US levies of 10-15 per cent from last year. He said these would rise to 25 per cent by June 1 unless Europe agrees to let the US "completely and totally" buy Greenland from Denmark.
European leaders called this outright blackmail. France's Emmanuel Macron wants the EU to fire the ACI for the first time ever, while Germany prefers using it as a threat rather than pulling the trigger right away. Emergency EU meetings in Brussels are discussing a €93 billion ($107.7 billion) retaliation package that could start on February 6 if talks fail.
European stocks tumbled on Monday, with the STOXX 600 down 1.3 per cent, France's CAC 40 off 1.8 per cent, Germany's DAX dropping 1.4 per cent, and London's FTSE 100 falling 0.4 per cent. US futures also slid, S&P 500 futures down 0.9 per cent and Dow futures 0.8 per cent, as investors worry about renewed trade wars unravelling deals from mid-2025. Asia was mixed, Hong Kong's Hang Seng lost 1.1 per cent, while South Korea's Kospi gained 1.3 per cent.