Europe could use trade "bazooka" option over proposed U.S. tariffs

President Donald Trump is promising new tariffs as part of his push for the U.S. to acquire Greenland.

In a post on Truth Social over the weekend, Trump said that beginning Feb. 1, the U.S. will impose new 10% tariffs on Denmark, of which Greenland is a part, along with seven other European countries who have opposed a U.S. takeover of the territory. He said that tariff will go up to 25% on June 1, and will remain in place until the U.S. has reached a deal to buy Greenland. 

The U.S. and the European Union are the world’s two largest economies. And for decades, they’ve traded pretty well together.

“There have been little trade disputes … like siblings fighting in the backseat of a car,” said Emily Blanchard, a professor of international economic policy at Dartmouth College.

She said like siblings, the U.S. and EU trade just about everything. Fun stuff, like French wine and Kentucky bourbon. But more so, big heavy stuff: industrial machinery, airplane parts, cars, and services like banking. 

Even after the Trump administration imposed widespread tariffs last year, it reached a preliminary trade deal with the EU.

“So we've been in a sort of cool detente since summer,” Blanchard said.

But now, with these new threatened tariffs over Greenland, Blanchard said that trade truce is, ”almost certainly on pause, if not out the window.”

And Europe could retaliate.

“So you may have heard the term ‘bazooka,’” said Juraj Majcin, an analyst with the European Policy Centre in Brussels. 

The trade ‘bazooka’ is more formally known as Europe’s anti-coercion instrument. Majcin described it as a regulation that says if another country is putting some kind of financial pressure on the EU to force a policy change, the EU — which is not generally known for being quick — can quickly hit back. That may look like unleashing tariffs against certain goods or even restricting certain companies from operating in Europe.

“That can be U.S. tech, tech companies like like Meta, like Google, that provide services,” Majcin said.

But before that can happen, he said, the regulation requires that the EU try to negotiate with the U.S.

And, he said European leaders don’t really want to restrict trade. 

“These are two big and highly trading partners, so it would have clearly nefarious effects, I think, for both sides,” Majcin said.

In other words, it would be bad for everyone if we stopped using each others’ stuff. 

Even if the U.S. and EU work past this, Carleton College economics professor Ethan Struby said this has profoundly hurt their relationship. 

“I think that the U.S.'s credibility on trade with Europe is pretty shot. If it's not shot with European leaders, it is certainly shot with the European public,” he said.

Struby said for trade to work, people need predictability; a clear set of rules that everyone follows.

And when rules or deals get ignored, it’s a lot harder to play nicely — or even at all.