While the recent imposition of US tariffs on aluminium and steel imports and the EU’s subsequent response may evoke a sense of déjà vu from the first Trump administration, the European Union (EU) has more arrows in its quiver than it had in 2018 when it comes to responding to US tariffs.
In this alert, we consider the legal avenues for an EU response to US actions and, in particular, the potential to deploy the 2023 EU Anti-Coercion Instrument (ACI)1 to implement a more targeted response to US tariffs than the EU can under Regulation (EU) No 654/2014 (Enforcement Regulation).2
US Tariffs on the EU
Tariffs played a significant role in the first Trump administration’s trade policy. Since winning a second term, President Trump has repeatedly signalled that tariffs on imports from a variety of US trading partners will again be a key trade policy instrument. Those words have now been turned into actions with new tariffs on almost all imports from Canada, Mexico and China being announced. See our 6 February 2025 client alert “Trump’s Tariffs on Canada, Mexico and China: Update and Analysis”.
On 10 February 2025, the US targeted the EU, announcing 25% tariffs on all steel and aluminium imports, as well as a considerable number of steel and aluminium derivatives. This measure became effective on 12 March 2025.
EU Response to Tariffs During the First Trump Presidency
In June 2018, the first Trump Administration introduced tariffs on European steel and aluminium exports, targeting €6.4 billion of EU goods. In 2020, additional tariffs affecting €40 million worth of EU derivative steel and aluminium products were imposed. The EU responded with so-called “rebalancing measures” in 2018 and 2020. These measures included tariffs on a range of politically sensitive goods, including sweet corn, maize, grain, whiskey, peanut butter, Harley Davidson motorcycles, jeans, orange juice, cigars, cigarettes and smoking tobacco, and steel and aluminum. However, ultimately the EU and US agreed to de-escalate trade tensions, and the EU’s rebalancing measures were suspended until 31 March 2025.
EU Response to the Latest US Tariffs
The EU’s response to the latest Trump tariffs is fast-evolving with the EU trade chief, Maroš Šefčovič, highlighting on 20 March 2025 the need to “keep a flexible approach so as to calibrate our response accordingly”.3
The initial approach announced on 12 March 2025 was two-fold: Firstly, the rebalancing measures were to be reinstated automatically when their suspension expires on 31 March 2025, thus applying in full from 1 April 2025. This meant tariffs of 10% to 50% would be imposed on products ranging from boats to bourbon to Harley Davidson motorcycles. Secondly, the European Commission (Commission) intended to launch a process to impose additional new countermeasures to be adopted by mid-April targeting approximately €18 billion of US exports, to ensure that the total value of the EU measures corresponded to the increased value of trade impacted by the new US tariffs.
However, as of 20 March 2025, the EU announced that it was keen to find a “mutually agreeable solution” with the US and intended to delay the imposition of its first set of tariffs in the interest of giving the parties more time to negotiate. The decision came after President Trump threatened a 200% tariff on all wines, champagne and alcoholic products coming from the EU.
As a result, the EU will be consolidating its two-staged response into a single measure to take effect on the 13 April 2025 covering up to €26 billion in US exports. It remains to be seen how the EU will fine tune its response in the coming days and weeks following discussions between the member states and with the US.
Enforcement Regulation
The EU’s rebalancing measures during the first Trump presidency were adopted under the Enforcement Regulation, and the additional package envisaged by the Commission in response to the latest US tariffs would be as well.
The Enforcement Regulation enables the EU to suspend or withdraw concessions or other obligations under international trade agreements in order to respond to certain breaches of international trade rules by third countries that affect the EU’s commercial interests. In particular, the Enforcement Regulation empowers the Commission to implement trade countermeasures where such action is “necessary to safeguard the Union’s interests”, inter alia, for the “rebalancing of concessions or other obligations, to which the application of a safeguard measure by a third country” gives right.4 Consequently, in order to introduce rebalancing measures in 2018, the first Trump administration’s tariffs on steel and aluminum were characterized as “safeguard measures”.5
The Commission is continuing to characterise the US tariffs imposed to date as a “safeguard measure”. However, the EU may face difficulties if the second Trump administration relies on the 1977 International Emergency Economic Powers Act to impose further tariffs by executive order on the basis of national security, not as a “safeguard” to protect the US domestic industry. If this occurs, the basis for any EU countermeasures under the Enforcement Regulation will be less certain and the EU may be forced to use other instruments such as the ACI.
The Anti-Coercion Instrument
The ACI was first floated in 2020 as in instrument to deter and counteract coercive actions by third countries. The proposal was precipitated in part by the US threat to retaliate against a proposed digital services tax and, subsequently, China’s response to Lithuania allowing Taiwan to open a representative office in Vilnius. Despite being adopted in November 2023, the ACI has not been deployed to date.
The ACI defines economic coercion as a third country applying or threatening to apply a “measure affecting trade or investment in order to prevent or obtain the cessation, modification or adoption of a particular act by the Union or a Member State, thereby interfering in the legitimate sovereign choices of the Union or a Member State”.6
The chief difficulty with using the ACI to respond to tariff threats is that it can take up to a year before any EU countermeasures are implemented, though the EU may be able to act much quicker in emergency situations. The process contains the following stages:
Commission’s examination. The Commission, either on request or on its own motion, examines the relevant third-country measure to determine if it satisfies the definition of economic coercion.7 The examination should rely on information gathered by the Commission as well as received from “any reliable source”, which includes national authorities, the European Parliament, as well as EU economic operators and trade unions.8
Determination. If the Commission concludes that the third country measure does constitute “economic coercion”, it submits a proposal to the Council of the European Union for an implementing act determining the measure to constitute coercion. The Council should act “expeditiously” and act within eight weeks of receiving the Commission’s proposal, though again a longer period may be provided.9 The Council may adopt this proposal by a qualified majority,10 meaning that no single country can veto the proposal.
Engagement with the third country. If the Council accepts the implementing act declaring economic coercion, the Commission has up to six months (unless a longer period is necessary)11 to engage with the third country through, amongst others, diplomacy, mediation or submitting the matter to international adjudication.12
Countermeasures: If the engagement has not led to the cessation of economic coercion, and it is “necessary to protect the interests and rights” of the EU and its member states “in light of the options available”, and such countermeasures are in the EU interest,13 the Commission can adopt EU countermeasures by delegated legislation.
The countermeasures available to the Commission include:
- Customs duties: Imposing or increasing customs duties, including beyond most-favoured-nation levels.
- Import/export restrictions: Introducing or increasing restrictions on importation/exportation, including quotas and licenses.
- Transit restrictions: Introducing restrictions on transiting goods or internal measures applying to goods.
- Public procurement: Excluding goods/services from public procurement or adjusting tender scores.
- Trade in services: Imposing measures affecting trade in services.
- Foreign direct investment: Imposing measures affecting foreign direct investment access.
- Intellectual property: Restricting protection or exploitation of intellectual property rights.
- Financial services: Imposing restrictions on access to EU banking, insurance and capital markets.
EU countermeasures under the ACI may be targeted to specific natural or legal persons connected or linked to the government14 of the relevant third country.15 Alternatively, they must be of “general application”, meaning they affect particular sectors, regions or operators of the third country.16
The ACI requires the Commission to seek information and views regarding the economic impact of any countermeasures on EU economic operators prior to adopting or amending any countermeasures,17 and minimizing the negative impact on the EU economy is one of the key criteria which the Commission must adopt for selecting the EU response.18 This opens up an opportunity for business to advocate for exemptions from any response measures.
Conclusion
Thus far the EU has decided to rely on the Enforcement Regulation to implement its response to the new US tariffs. This has the advantage of speed and predictability, as the procedure has been used before. However, as the trade tensions escalate, the EU may be compelled to reach for the ACI, which offers much greater flexibility in the type of countermeasures the EU may impose.
Businesses should be tracking these developments closely, especially to understand the impact that the tariffs being imposed by both the US and the EU may have on their supply chains.
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1 Regulation (EU) 2023/2675 of the European Parliament and of the Council of 22 November 2023 on the protection of the Union and its Member States from economic coercion by third countries.
2 Regulation (EU) No 654/2014 of the European Parliament and of the Council of 15 May 2014 concerning the exercise of the Union’s rights for the application and enforcement of international trade rule.
3 EU Trade Commissioner Maroš Šefčovič, speaking in a joint hearing of the European Parliament’s Committee on International Trade on 20 March 2025.
4 Enforcement Regulation, art 3(c), and 4(1).
5 See Commission Implementing Regulation (EU) 2018/886, recital (3); Enforcement Regulation, art 3(c).
6 ACI, art 2(1).
7 ACI, art 4(1).
8 ACI, art 4(2).
9 ACI, art 5(1), (5)-(6).
10 ACI, art 5(5).
11 ACI, art 5(2).
12 ACI, art 6(1).
13 ACI, art 8(1).
14 Under article 10(1) of the ACI, a person will be connected or linked to a third country government, where the government (i) owns beneficially more than 50% of the equity interest in such an entity or has the power to appoint a majority of its directors or otherwise to legally direct its actions; (ii) such a person has ‘exclusive or special rights’ in law or in fact by that government; or (iii) the person effectively acts on behalf of, or under the direction of that government.
15 ACI, art 8(3).
16 ACI, art 8(3).
17 ACI, art 13(1).
18 ACI, art 11(2)(b).