Beware of the bazooka!

Euractiv

4 days ago

Journalism has many rules: be accurate; be balanced; protect your sources. Donald Trump, however, has apparently prompted EU hacks to endorse yet another edict: never – ever – write about the US president's tariffs without mentioning Brussels' 'trade bazooka ' .
This propensity has dramatically intensified since last Saturday, when Trump threatened to hike the baseline US levy on European exports from 10% to 30% from 1 August.
Indeed, reporters – many of whom appear to have spent their youths overindulging in explosion-filled Arnold Schwarzenegger films – now seem incapable of writing about US trade policy without mentioning the likely imminent activation of the 'anti-coercion instrument', or 'ACI'. (Full disclosure: I've also written about the ACI, and I also love Arnie.)
Typically, journalists are careful to couch their language in such a way as to ensure their claims are almost tautologically true: the Financial Times , for instance, recently claimed that the 'bazooka' tool [is] being considered ' by Brussels – an assertion that would, strictly speaking, be correct if Björn Seibert fleetingly pondered its use while tying his Asics sneakers.
Other, similarly vacuous ways of describing Brussels' attitude towards the ACI include 'floats' and 'mulls' ( Bloomberg ); the clunkier 'looking to use' (also the FT ); and the hilariously in correct 'agonises over' ( Politico ). (Arguably, the image of vapid Eurocrats 'agonising over' whether or not to fire a bazooka is reminiscent of George Carlin's joke about the inventor of flamethrowers: 'Gee, I'd sure like to set those people on fire over there – but I'm way too far away to get the job done.')
Jokes aside, there are three key questions for us to, er, consider. First, what is the ACI? Second, will it be used? And third, should it be?
Ironically, the ACI was actually conceived as a direct result of Trump's policies during his first term. In particular, the US withdrawal from the Iran nuclear deal in 2018 prompted EU officials to develop an instrument that would protect the bloc from US 'secondary sanctions', which Washington threatened against firms and countries that continued to trade with Tehran.
The efforts were subsequently turbocharged by China's imposition of export controls on strategically critical minerals on Lithuania in 2021, after the Baltic nation upgraded diplomatic ties with Taiwan, a self-governing island whose independence Beijing refuses to recognise.
According to experts, the instrument, which came into force in 2023 but has never actually been used, is undoubtedly Brussels' most powerful – and versatile – trade weapon.
'The term 'bazooka' is trendy in Brussels, but it's also pretty accurate,' said Tobias Gehrke, a senior policy fellow at the European Council on Foreign Relations. 'The range of potential responses is unrivalled: hypothetically, you can do a lot of damage.'
This potential damage includes imposing investment restrictions, withdrawing intellectual property protections, suspending individual companies' licences, banning access to EU public procurement markets, and sanctions targeting specific individuals, he said.
Crucially, the ACI can legally empower the European Commission, which oversees EU trade policy, to impose countermeasures targeting not just a 'coercing' nation's goods but also its services .
This is important for two reasons. First, because the EU, which has already threatened to slap retaliatory levies on €93 billion worth of US goods, is now running out of goods to target.
Second, because unlike trade in goods, the bloc runs a substantial deficit in services with the US – thus in theory giving it 'escalation dominance' over Washington in this area.
Thus, it would seem that the ACI could be the perfect tonic for Brussels' transatlantic malaise: at a time when Trump is continuing to escalate his tariff threats, a bazooka blast might be just what the trade doctor ordered. Trigger-happy journalism Unfortunately – and unlike with an actual bazooka – there are numerous practical, political, and strategic obstacles standing in the way of the ACI's use.
The first is timing. The first stage of the ACI's activation involves a four-month investigation by the Commission to determine whether 'coercion' has actually taken place. Then, member states can take up to two and a half months before voting on the Commission's findings. Then, if member states approve, the Commission has six months to negotiate with the coercing party and outline potential countermeasures if talks fail.
In short: even if member states were keen on loading it, it would probably take a year, if not more, before the bazooka could fire. By that point, Trump may have succeeded in cowing the EU into submission – or, if we're lucky, market forces may already have forced him to back down.
Second, it is far from clear whether member states do , in fact, want the bazooka to be loaded.
Activation of the ACI requires the support of a 'qualified majority' of EU member states, or 15 of the bloc's 27 countries, which collectively represent at least 65% of the bloc's population. As it stands, however, no countries are currently in favour of triggering the ACI, according to three diplomats briefed on EU ambassadors' closed-door discussions this week.
Instead, only a handful of countries – including France, Spain, and Portugal – are open to more explicitly threatening to use the ACI during negotiations with the US. A couple more countries are similarly open to exploring the possibility of targeting services using other, less powerful trade defence tools (e.g. the Enforcement Regulation).
This, in turn, suggests that Bloomberg's 'scoop' earlier this week that a 'growing number' of member states 'want the bloc to activate' the ACI if trade talks with Washington fail is largely false, insofar as it conflates the threat of using the ACI with actually using it.
Moreover, it is similarly likely that Bloomberg confused invoking the ACI with the EU's increasing openness to targeting services – something the FT and Politico separately 'scooped' earlier this week and which, in fact, is true.
Unfortunately, it is also not a scoop: the Commission publicly admitted earlier this week that it is drawing up ways of targeting US services.
Leopoldo Rubinacci, a senior Commission official involved in US trade negotiations, told the European Parliament's International Trade Committee on Monday that Brussels 'is practically ready on also considering [trade] measures that do not cover goods ( sic )'. He also denied that these measures would be imposed under the auspices of the ACI.
'We will decide when the time comes whether we need to use, also, the anti-coercion instrument,' he said. (Interestingly, Rubinacci also denied that the Enforcement Regulation allows for retaliation against services – which raises the question of what the Commission's legal justification for targeting US services actually is.) 'A dangerous escalation'? In addition to legal and political difficulties, however, there are also huge geoeconomic risks associated with triggering the bazooka – namely, the possibility of massive US retaliation.
In a recent note, Deutsche Bank warned that triggering the ACI could constitute 'a dangerous escalation' of the EU-US trade war and 'has the potential for enormous self-harm if directed at US tech services in particular'.
'Europe is highly dependent on these service imports,' Deutsche added. 'Any counterresponse by the US to curb access to tech services would be massively disruptive to business in Europe. This is an escalation that only has downside for the EU.'
To further bolster Deutsche's point, it is possible – if not likely – that any EU push to target US service providers could prompt other forms of US retaliation.
Trump could, for instance, step up attempts to annex Greenland, threaten to withdraw US military support for Europe, or even pull out of NATO.
Other analysts, however, argue that such warnings are based on a fundamental misconception of the ACI's nature and purpose.
'You can't generalise that the ACI will massively backfire because you can take a million different measures,' said Gehrke.
'You can withdraw entire licenses and take away intellectual properties protections – that's obviously a nuclear bomb. Or you can be very limited and just crank up some regulatory hurdles here and there to make life more difficult or costly for these companies.'
Other analysts stress that the main goal of 'triggering' the ACI is precisely for the threat of countermeasures to boost the EU's chances of a trade deal during the six-month negotiation process.
'The ACI wasn't designed to be used, but rather to be threatened to be used,' said Arthur Leichthammer, a policy fellow at the Jacques Delors Centre.
The Commission appears to be thinking along similar lines. 'The anti-coercion instrument is not an end in itself,' Rubinacci said on Monday. 'The anti-coercion instrument is an instrument.'
In short: to journalists' likely dismay, use of the bazooka remains exceedingly unlikely. Moreover, even if it were used, only a worst-case scenario would see the bazooka eventually firing an explosion of trade countermeasures.
However, such countermeasures would not only take many months to be imposed, but would also carry risks of severe political and economic blowback.
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