EU Prepares Tougher Retaliation as US Trade Deal Hopes Fade

As prospects for a transatlantic trade deal dim, the European Union is preparing a broader range of retaliatory measures against the United States, according to EU diplomats.

Several EU member states, including Germany, are now backing the potential use of the bloc’s sweeping “anti-coercion” powers—measures that could target U.S. services and restrict access to lucrative EU public contracts if trade negotiations fail.

The European Commission, which represents the 27-member bloc in trade talks, had been working toward a deal that would still involve a 10% U.S. tariff on most EU exports—but with certain concessions. However, those expectations have collapsed following President Donald Trump’s threat to impose a 30% tariff on EU goods by August 1, and inconclusive talks in Washington last week between EU Trade Commissioner Maroš Šefčovič and U.S. officials.

Šefčovič warned that a 30% tariff would “practically prohibit” transatlantic trade. He delivered a grim update to EU envoys on Friday, according to diplomats.

“No one seemed able to say definitively what Trump would accept,” said one EU diplomat. “Each U.S. official had a different version.”

US Refuses EU Proposal for "Standstill" on Tariffs

Hopes of reducing or eliminating the existing 50% U.S. tariffs on steel and aluminum—and the 25% tariffs on cars and car parts—are also fading.

In addition, U.S. officials rejected the EU’s request for a “standstill” clause that would prevent any new tariffs after a deal. They argued that President Trump cannot be bound on national security grounds, citing ongoing Section 232 investigations into sensitive sectors like pharmaceuticals, semiconductors, and timber.

As a result, EU sentiment has shifted. While a negotiated agreement remains the preferred option, member states are becoming more open to retaliatory measures.

EU Tools for Retaliation

The EU currently has a suspended package of retaliatory tariffs on $24.5 billion (€21 billion) worth of U.S. goods, which could be reinstated after August 6. The bloc is also considering additional measures on $84 billion (€72 billion) of U.S. exports.

More significantly, diplomats say momentum is building behind the EU’s Anti-Coercion Instrument (ACI). Originally designed to counter economic pressure from countries like China, the ACI allows the EU to strike back when member states are targeted to change their policies.

If activated, the ACI could include:

• Hitting U.S. services exports (where the U.S. has a trade surplus with the EU)

• Restricting access to the EU’s €2 trillion public procurement market

• Limiting U.S. investments and intellectual property protections

• Curtailing U.S. exports of chemicals and food products to Europe

France has consistently supported using the ACI, though some countries have hesitated, calling it a “nuclear option.” President Trump has warned of retaliation if other nations act against the U.S.

European Commission President Ursula von der Leyen recently said that the ACI is “for extraordinary situations,” adding, “We are not there yet.” However, support for invoking it is growing, with Germany now among the states backing consideration of the tool.

To trigger the ACI, the Commission would need approval from a qualified majority—at least 15 EU countries representing 65% of the EU population. Officials say they won’t move forward unless they are confident they have the votes.