Europe is now considering using a “trade bazooka,” a potent, multilayered tool in its arsenal of economic deterrents, after President Trump threatened a trade war with European nations that oppose his bid to acquire Greenland.
Norway says its prime minister has received a message from Trump hinting that Oslo’s failure to award him the Nobel Peace Prize is at least partly to blame for his stance.
Trump’s tariff threat to Europe is discussed in detail, along with Europe’s response.
What was in Trump’s Norway letter over Greenland?
The office of Norwegian Prime Minister Jonas Gahr Store confirmed on Monday that he had received a  from Trump, saying, “I no longer feel compelled to think purely of peace. Your country decided not to award me the Nobel Peace Prize for stopping 8 Wars PLUS.”
Trump added: “Although it will always be predominant, but can now think about what is good and proper for the United States of America”.
Trump once more stated that he doubts Denmark’s ability to protect Greenland from China or Russia.
“The World is not secure unless we have Complete and Total Control of Greenland”, he wrote.
Trump has threatened what tariffs against Europe.
In a post on his Truth Social platform on January 17, Trump wrote that he had subsidised Denmark and other European Union countries by not charging them trade tariffs.
He claimed that a 10% levy would apply to all exports to the US from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands, and Finland starting on February 1.
On June 1 this year, the tariff would be increased to 25 percent, he said. Trump wrote that “This Tariff will be due and payable until a Deal is reached for the Complete and Total Purchase of Greenland” is reached.
“The United States has been trying to do this transaction for over 150 years. Denmark has repeatedly tried, and for good reason, but it has always refused.
Danish and Greenlandic leaders have repeatedly stated that the autonomous territory of the Kingdom of Denmark is not for sale, and recent demonstrations on the island have opposed Trump’s push to acquire it.
Why is Greenland wanted by the US?
The US interest is longstanding: after buying Alaska in 1867, Secretary of State William Seward unsuccessfully tried to buy Greenland. President Harry Truman secretly offered $100 million to Greenland in 1946, but Copenhagen turned down the offer, which was later made public.
During World War II, the US occupied the island and built military facilities, maintaining a presence today at Pituffik Space Base.
Greenland, an island in the Arctic that is sparsely populated and largely Indigenous Inuit, is geographically located in North America but politically located in Denmark, making it a part of Europe. Greenland withdrew from the European Community (EC/EU) in 1985 after it gained home rule, but maintains a special association with the EU as an Overseas Country and Territory (OCT), which grants limited internal market access and EU citizenship to Greenland’s residents through Denmark.
According to the Trump administration, it is crucial for US military operations and early-warning systems because of its close proximity to the Arctic and North Atlantic oceans, which allows for the shortest air and sea routes between North America and Europe.
Greenland’s economy relies mainly on fishing, locals oppose large-scale mining, and there is no oil or gas extraction. However, it has significant deposits of rare-earth metals, including minerals, that are essential for the production of technology like smartphones and fighter jets. The island has therefore drawn increasing interest from leading powers as climate change opens up new shipping lanes in the Arctic.
How has Europe responded to Trump’s threat of tariffs?
Many nations in Europe want to pursue diplomatic options with the US before retaliating with tariffs of their own, but have not ruled it out.
Engage rather than escalate is our top priority. Sometimes the most responsible form of leadership is restraint”, European Commission spokesperson Olof Gill said on Monday.
Gill did, however, claim that “the EU has resources available and is prepared to respond” in the event of tariff increases.
The 27 members of the EU convened for an emergency meeting on Sunday to discuss their response to Trump’s threat.
The eight nations that Trump has targeted with new tariffs also said in a joint statement that they “stand in full solidarity” with Denmark and the residents of Greenland, a semi-autonomous Danish territory.
“Building on the process begun last week, we stand ready to engage in a dialogue based on the principles of sovereignty and territorial integrity that we stand firmly behind”, Denmark, Finland, France, Germany, the Netherlands, Norway, Sweden and the UK said in the statement.
Threatening tariffs could lead to a dangerous downward spiral and undermine transatlantic relations. We will continue to stand united and coordinated in our response. Our goal is to defend our independence.
During an address to the nation on Monday, Prime Minister Keir Starmer said the UK believes Greenland is part of Denmark and its future must be determined by Greenland and Denmark only.
It is completely wrong to impose tariffs on allies in order to protect NATO allies’ collective security. We will of course be pursuing this directly with the US administration”, Starmer said. He continued to make the same assertions in his address and subsequent media interviews that he is no longer opposed to launching retaliatory tariffs against the US. “A tariff war is not in anyone’s interests”.
German Chancellor Friedrich Merz warned that an Atlantic Ocean tariff war would hurt both sides of the atlantic ocean this week.
“We want to avoid any escalation in this dispute if at all possible”, Merz said. We simply want to work together to solve this issue. He did not rule out using tariffs if absolutely necessary, however.
Ursula von der Leyen, president of the European Commission, and Antonio Costa, president of the European Council, both wrote identical but disjointed X-posts, saying: “Tariffs would undermine transatlantic relations and run the risk of a dangerous downward spiral. Europe will remain united, coordinated, and committed to upholding its sovereignty”.
However, some European leaders have urged the EU to activate a never-used economic tool designed to combat coercion from states outside the EU. They have been more open to suggestions about how to respond to Trump’s threats.
David van Weel, the foreign minister of the Netherlands, said during an interview on Dutch television on January 18: “It’s blackmail what he’s doing … and it’s not necessary. It also doesn’t support Greenland and [NATO] the alliance.
“The Anti-Coercion Instrument (ACI), designed precisely for such cases, must now be used”, German MEP Bernd Lange, who chairs the European Parliament’s trade committee, said in a post on X.
“I urge the European Commission to immediately activate it.”
During the emergency EU meeting on Sunday, French President Emmanuel Macron also requested that the bloc activate the ACI, also known as a “trade bazooka”, according to news reports.
What is the trade bazooka, or ACI?
The trade bazooka is a legal mechanism that the EU proposed late in 2021 and adopted in 2023 to protect European countries from economic pressure by non-EU countries.
By the end of his first term, in January 2021, Trump had wagned a trade war with several of Washington’s main trading partners, including the EU, which imposed US tariffs on steel and aluminum exports.
In December 2021, China blocked Lithuanian goods from entering Chinese ports after Lithuania was deleted from China’s electronic customs declarations system. This was in response to Lithuania’s decision to permit Taiwan, which China views as its territory, to establish a de facto diplomatic presence in Vilnius under the name “Taiwanese Representative Office.” China’s block also applied to exports from other EU member states when the goods contained Lithuanian components or were linked to Lithuania.
As China was preventing goods, the bazooka concept was put forth in the EU on December 8, 2021.
It was, therefore, adopted in 2023 with countries like China in mind, rather than allies like the US, Erica York, vice president of federal tax policy at the Tax Foundation, told US media.
The ACI enforcs restrictions on US businesses’ ability to sell goods in Europe. This is the European Union’s most powerful economic weapon”, Jo Michell, a professor of economics at the University of the West of England in Bristol, told Al Jazeera.
It includes costs associated with US imports of goods and services, EU restrictions, and potential public sector contracts being prohibited for US companies.
Essentially, the trade bazooka involves a series of measures, including steep retaliatory tariffs and increased customs duties. The EU may restrict or restrict US goods, services, or businesses’ access to its single market if applied to the US.
It could also place restrictions on exports and imports through quotas or licences. Additionally, the EU may impose restrictions on US financial services, which would increase costs for US banks and businesses that depend on conducting business in Europe.
How would the ACI be implemented?
It’s a last-resort deterrent measure, which has never been used. There are several steps that must be taken before it can be deployed.
A company, a third party in the EU, or the Commission itself files a complaint alleging economic coercion from a nation outside the EU. The European Commission then launches a formal investigation into the allegation, which it is supposed to complete within four months.
The commission will first attempt to resolve the problem diplomatically if it discovers that economic coercion is indeed occurring. If those efforts fail, the EU can move towards activating the ACI.
A “qualified majority” of the EU’s 27 nations, which make up at least 65 percent of the population, must be in favor of the move in order to do so. This gives countries with larger populations, such as Germany, France and Italy, significant influence.
Member states have ten weeks to respond or reject a proposal to start the bazooka. In total, the entire process can take up to a year before the bazooka fully comes into effect.
Given the urgency of the situation, Michell said, “The EC may be able to move relatively quickly, but the implementation vote may take place in months rather than weeks.”
What effect could the ACI have on the US and Europe?
In terms of goods, the US and the EU have a significant trade deficit. This means it imports more from the EU than it exports.
The EU generated a trade surplus of almost 200 billion euros ($227bn) in 2024 as a result of exporting 531.6 billion euros ($603bn) of goods to the US and importing products worth 333 billion euros ($377.8bn).
The picture is different for services, however. In 2023, the US had a surplus of more than 109 billion euros ($124 billion) in services, with notable IT exports led by significant US tech companies, intellectual property, and financial services.
The bazooka could therefore hit the US where it hurts, allowing Europe to go beyond traditional tariffs on goods and restrict or tax US services instead.
“The US would suffer significantly if large US tech companies were to be subject to restrictions, which would likely affect share prices. The US is also exposed in areas such as pharmaceuticals and aerospace”, Michell said.
However, the bazooka would also be harmful to European workers and consumers. Restrictions on services would mean limited choices or higher prices for US services. Additionally, higher prices for those products would result from retaliatory tariffs on US goods as well.
What will Europe choose to do?
This week, UK financial media reported that the bloc might impose tariffs on US goods worth 93 billion euros ($108bn).
“Imposing 93 billion of tariffs is the first line of defence”, Mohit Kumar, chief European economist at New York-based investment banking and capital markets firm Jefferies, told Al Jazeera.
In the EU, “Anti-coercion measures require a qualified majority” [… Germany has already said that it would prefer negotiations. Therefore, it remains to be expected that the bazooka won’t be used, according to Kumar.
Source: Aljazeera
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