The EU's Hidden Instrument to Address Trump's Economic Bullying: Time to Deploy It

Will Brussels ever stand up to Donald Trump and US big tech? The current lack of response is not just a legal or financial failure: it represents a ethical collapse. This situation throws into question the core principles of the EU's democratic identity. What is at stake is not only the fate of firms such as Google or Meta, but the principle that the European Union has the right to govern its own online environment according to its own rules.

The Path to This Point

First, let us recount how we got here. During the summer, the EU executive agreed to a one-sided agreement with Trump that established a permanent 15% tax on EU exports to the US. The EU received nothing in return. The indignity was all the greater because the commission also consented to direct well over $1tn to the US through financial commitments and purchases of resources and defense equipment. This arrangement revealed the fragility of Europe's reliance on the US.

Soon after, Trump threatened crushing additional taxes if Europe enforced its laws against American companies on its own territory.

Europe's Claim vs. Reality

Over many years EU officials has asserted that its economic zone of 450 million affluent people gives it significant sway in international commerce. But in the six weeks since Trump's threat, the EU has done little. Not a single retaliatory measure has been implemented. No invocation of the new anti-coercion instrument, the so-called “trade bazooka” that the EU once promised would be its primary shield against external coercion.

By contrast, we have diplomatic language and a penalty on Google of under 1% of its annual revenue for established market abuses, already proven in US courts, that enabled it to “exploit” its market leadership in the EU's advertising market.

US Intentions

The US, under the current administration, has signaled its goals: it no longer seeks to support European democracy. It aims to undermine it. A recent essay published on the US Department of State's website, composed in paranoid, bombastic rhetoric reminiscent of Hungarian leadership, charged the EU of “systematic efforts against democratic values itself”. It condemned supposed limitations on political groups across the EU, from German political movements to Polish organizations.

The Solution: Anti-Coercion Instrument

What is to be done? Europe's trade defense mechanism functions through assessing the extent of the coercion and imposing retaliatory measures. Provided EU member states agree, the EU executive could remove US products out of Europe's market, or impose tariffs on them. It can strip their intellectual property rights, prevent their financial activities and require reparations as a condition of readmittance to Europe's market.

The tool is not only financial response; it is a declaration of political will. It was created to demonstrate that Europe would never tolerate external pressure. But now, when it is most crucial, it remains inactive. It is not a bazooka. It is a symbolic object.

Political Divisions

In the period leading to the EU-US trade deal, several EU states talked tough in official statements, but failed to push for the mechanism to be used. Others, such as Ireland and Italy, publicly pushed for a softer European line.

Compromise is the worst option that the EU needs. It must enforce its laws, even when they are inconvenient. In addition to the anti-coercion instrument, Europe should shut down social media “recommended”-style systems, that suggest material the user has not requested, on European soil until they are proven safe for democratic societies.

Broader Digital Strategy

Citizens – not the algorithms of foreign oligarchs beholden to external agendas – should have the autonomy to decide for themselves about what they view and share online.

Trump is putting Europe under pressure to water down its digital rulebook. But now more than ever, Europe should hold American technology companies accountable for distorting competition, surveillance practices, and preying on our children. EU authorities must ensure certain member states responsible for not implementing EU online regulations on American companies.

Enforcement is not enough, however. Europe must gradually substitute all foreign “major technology” services and computing infrastructure over the next decade with homegrown alternatives.

Risks of Delay

The significant risk of the current situation is that if Europe does not take immediate action, it will become permanently passive. The more delay occurs, the more profound the erosion of its confidence in itself. The increasing acceptance that opposition is pointless. The more it will accept that its regulations are not binding, its institutions not sovereign, its democracy not self-determined.

When that occurs, the route to authoritarianism becomes inevitable, through algorithmic manipulation on social media and the acceptance of lies. If the EU continues to cower, it will be pulled toward that same decline. The EU must act now, not just to push back against US pressure, but to establish conditions for itself to function as a free and sovereign entity.

International Perspective

And in taking action, it must plant a flag that the rest of the world can see. In Canada, South Korea and East Asia, democracies are observing. They are wondering if the EU, the last bastion of international cooperation, will resist foreign pressure or yield to it.

They are asking whether representative governments can endure when the most powerful democracy in the world abandons them. They also see the example of Brazilian leadership, who faced down US pressure and demonstrated that the approach to deal with a bully is to hit hard.

But if Europe delays, if it continues to issue polite statements, to impose symbolic penalties, to hope for a better future, it will have already lost.

Emily Terrell
Emily Terrell

Financial analyst with over a decade of experience in investment management and wealth advisory, specializing in market trends.