Policymakers in Brussels and other European capitals are scrambling to calibrate their response to Donald Trump’s latest barrage of tariff threats.
Things are expected to move quickly over the next three days. An emergency summit of the EU’s 27 leaders in Brussels on Thursday may not be the last time the heads of government and state are convened at short notice in the next fortnight or so.
At the moment there is a lot of talk about the EU reaching for its “big bazooka”, the Anti-Coercion Instrument (ACI), to retaliate against Trump’s threats of new tariffs if Greenland is not handed over to the US.
The instrument would give the EU wide-ranging freedom to restrict US companies’ ability to operate in the European market. That could include special tariffs on tech giants and other industries, import and export restrictions, and barring bids on public contracts.
Ireland would be caught squarely in the middle of such a move, given its economic dependence on US tech and pharma firms based here.
French president Emmanuel Macron is pushing for the EU to trigger the anti-coercion instrument, something most see as the nuclear option. The German government, the EU’s other big power beside France, believes the ACI should be kept in reserve to deploy as a last resort.
Senior figures involved in directing Ireland’s response concede that what is coming from Washington looks a lot like coercion, but argue that deploying the ACI would be “the extreme approach”, in one senior minister’s words, with Dublin favouring a stepwise procedure and a first emphasis on dialogue. Another Cabinet source said while some in Europe favour a “much harder line”, the hope is that diplomatic pressure can be applied across a variety of settings this week, ranging from Davos to Brussels and within Nato and the G7.
EU officials are also conscious of the need to keep some of their powder dry, in what could become a fight that escalates further before it is resolved. Any initial EU retaliation would certainly be met with threats of even higher US tariffs.
Discussions between diplomats in Brussels since the weekend indicate that a required majority of national governments do not favour using the trade bazooka, yet. There is a feeling that could change, depending on the outcome of efforts to talk Trump down.
While there is wariness in Dublin of aggressively upping the ante against Trump, Irish ministers are firm that sovereignty cannot be impinged upon, one saying that “Europe has to have a level of self-respect” around the measures it would take if diplomacy falls short.
For now, it seems most likely a package of EU counter tariffs on €93 billion-worth of US trade will be the first volley, in the event talks between European leaders and Trump don’t succeed, and an associated postponement of a vote approving the US-EU trade deal. Dublin and Brussels both see February 6th, when a previous freeze on the €93 billion in counter-tariffs needs to be extended or they come into effect, as a natural hinge point for negotiations.
The evergreen hope that markets will be a corrective to Trump – as proved to be the case in the wake of Liberation Day last year – springs eternal, or that the US supreme court or domestic opinion in the US may constrain the president. The Coalition is cool on the idea of any solo runs to communicate Irish displeasure with Trump – curtailing the St Patrick’s Day programme, for example, is “not on the cards at the moment”, said one minister.
Modelling the impact of a trade war is inherently difficult given the volatility at play, although there is some optimism about the level of resilience in the Irish economy. That, however, is counterbalanced by anxiety about a bigger and more lasting change in geopolitics and trade.