The Anti-Coercion Instrument: What Is It and How Europe Might Use It Over the Next Four Years

Since Donald Trump’s election to a second term as President of the United States, the possibility of U.S. trade measures against the European Union became more tangible. The new administration is reportedly considering imposing sanctions on certain EU Member States and imposing additional tariffs on EU exports to the U.S.

During the last few months, several projects that could adversely affect the EU have been placed on the table. For example, President Trump has announced his intention to impose tariffs on EU products if the EU Member States do not buy more U.S. oil and gas. In addition, big tech companies are pushing the Trump administration to launch a Section 301 investigation into the EU’s Digital Services Act (DSA) and Digital Markets Act (DMA).

President Trump’s first Executive Order entitled “America First Trade Policy” outlines a robust “America first” policy that will not only focus on the perceived challenges posed by potential U.S. adversaries (e.g., China), but may also affect the EU and its Member States. In light of this reality, this article examines the ways in which companies based in the EU may be able to address the potential U.S. tariffs.

How Has the EU Historically Responded to Increased U.S. Economic Pressure?

Although U.S. trade actions are set to intensify considerably, recourse to such action is nothing new.  During President Trump’s first term, the U.S. engaged in trade disputes with the EU. In particular, the U.S. imposed a large number of tariffs on European steel and aluminum (U.S. Section 232 tariffs), as well as on certain other products from individual Member States.

The EU responded to these actions by reorganizing its regulatory framework and passing laws adapted to the new geopolitical reality (such as the Foreign Subsidies Regulation, the Anti-Coercion Instrument, the DSA, and the DMA). It also relied on traditional trade responses, initiating WTO cases in response to the steel and aluminum tariffs and the duties on Spanish olives imposed during the first Trump administration, and imposing rebalancing tariffs on U.S. products. These efforts led to an agreement between the EU and the U.S. under President Biden, which is due to be assessed in March 2025 by both parties and which could reignite tensions.

In this context, the relevant question is how the EU will react and whether it will be able to do so effectively. After President Trump’s election, many experts in Europe called for a unified EU response and warned of the danger of Member States acting independently. It appears that the EU’s Anti-Coercion Instrument (ACI) could provide a vehicle for such general EU response to President Trump’s trade policies, whether they come in the form of sanctions or tariffs.

What is the Anti-Coercion Instrument?

In short, the ACI provides a legal framework for a centralized and structured EU response to third country “coercion” through diplomatic means and, failing that, through any counter measures deemed necessary.  The ACI states that one of its objectives is to ensure its responses are always in strict adherence to internal and international legality.

The ACI was adopted at the end of 2023 as part of the EU’s open strategic autonomy – a trade policy that has been in place since 2021 (see our previous alert). At the time of writing, the ACI has not yet been used. Conceived as a new trade defense instrument (TDI), the ACI aims to reinforce the EU’s ability to make its own choices and depend less on imports. It was passed at a time of increased coercive threat against Member States and European companies alike. The Commission calls it “a deterrent” against coercion from third countries.

If used, how would the Anti-Coercion Instrument work?

Under the ACI, the Commission would initiate proceedings to determine whether a third country measure could be considered to be economic coercion as understood under the ACI’s terms. Were coercion then identified, the Commission would submit a proposal to the EU Council for an implementing act, which would be adopted and amended by the Member States under the EU qualified majority voting rules.

In this way, the Member States retain control over the use of the ACI. This means that if there are disagreements between the Member States, this could effectively prevent the use of the ACI. Under the qualified majority voting rules, a negative vote from France and Germany, for example, would prevent the adoption of an ACI act.

If an implementing act were adopted, it would then be for the Commission to take the diplomatic initiative by requesting that the third country cease the economic coercion immediately and repair the injury, and by starting a consultation phase with the third country concerned. If diplomatic efforts were to fail, the Commission would then be able to adopt any measures deemed necessary and in the overall EU interest.

Which response measures can be implemented under the Anti-Coercion Instrument?

When selecting the response measures, the Commission must consider several factors including the gravity of the economic coercion, its economic impact on the Union or a Member State and the rights of the Union and its Member States, ensuring that its response is proportionate and does not exceed the level of injury caused to the Union.

The ACI offers the Commission a wide choice of response measures. It provides for the possibility of increasing customs duties, restricting importations or exportations, excluding participation in public tenders, and also allows for the non-performance of applicable international obligations in numerous fields (international property rights, insurance, banking, chemicals, and so on).

Such response measures can also target specific individuals and companies which engage or might engage in activities falling under the EU’s common commercial policy and are connected or linked to the government of the third country. The latter criterion is met when:

• The government of the third country concerned controls the legal person.
  It owns more than 50 % of the equity interest, exercises directly or indirectly more than 50 % of the voting rights in it, or has the power to legally direct its actions;
• The person benefits from exclusive or special rights or privileges granted in law or in fact by the government of the third country concerned.
  This includes instances where the person operates in a sector where that government limits the number of suppliers or buyers to one or more, or it is allowed directly or indirectly by that government to exercise practices which prevent, restrict or distort competition; or
• The person effectively acts on behalf of, or under the direction or instigation of, the government of the third country concerned.

Based on the above-listed criteria, it is clear that legal or natural persons can also be targeted by response measures if the government of a third country uses them as a means to exercise coercion on the EU. However, the opposite (i.e. if the said person advocates for the relevant government to coerce the EU) is not captured by the ACI. Therefore, response measures under the ACI should not be used to retaliate against lobbying efforts.

What role can EU businesses play in an Anti-Coercion Instrument procedure?

The ACI provides for the consultation of stakeholders at several points in the procedure. First and foremost, economic operators can submit a substantiated request asking the Commission to examine whether a third-country measure is coercive in the sense of the ACI. In addition, the Commission may invite stakeholders to submit information to help determine whether or not the third-country measures are coercive, enabling EU economic operators to play a role at the initial stages of the procedure.

Then, and perhaps more importantly, any response measure must be in the general EU interest, which includes inter alia the interests of EU economic operators, including upstream and downstream industries, and the interests of EU final consumers affected or potentially affected by the economic coercion or by any EU response measures.

Response measures must be proportionate and effective. They must avoid or minimize, to the extent possible, any negative impacts on EU actors, especially if these actors have limited alternatives for doing business with the coercive third country as a source of supply for goods or services. The Commission is obliged to be mindful of the investment environment in the EU or a Member State when choosing how to respond.

Thus, when assessing what constitutes a lawful response measure under the ACI, the Commission will have to seek the views of EU economic operators. This will also be the case when the Commission intends to amend, suspend or terminate the ACI measures.

In this way, the voice of EU businesses will be heard at every stage of the procedure, and will play an essential role in determining the EU interest at large.

Will the Anti-Coercion Instrument be utilized?

The ACI defines “coercion” in broad terms. It covers any third country measure affecting trade or investment in order to prevent or obtain the cessation, modification or adoption of a particular act by the EU or a Member State. Thus, the third country measure must necessarily be linked to a particular act, whether a legal act or the expression of a position, and regardless of whether this particular act emanates from the EU, a Member State, a third country or an international organization.

Given that broad definition and the associated political pressure, we anticipate that EU Member States and their politicians will closely examine the extent to which the ACI can be used to protect EU interests in response to any new policies or challenges to existing policies from the United States. The ACI tool appears better designed to capture challenges to EU legislation (e.g., challenges to the application of the DSA or DMA, as Mr. Berndt Lange, chair of the European Parliament’s trade committee, has announced) and less well-tailored to U.S. actions that the latter justifies on national security grounds, as in the case of Section 232 measures. However, we expect the EU to closely examine any action and weigh carefully its ability and political willingness to respond, as the EU Commissioner Valdis Dombrovskis confirmed that the EU “will be responding in a proportionate way” to any U.S. increase in tariffs on the EU.

However, for the ACI to be effective as a response to changes in U.S. policy, a number of things need to happen. Firstly, the Member States must decide on a concerted response against the U.S. This is not a given. The saga of the battery electric vehicles from China case has shown the reluctance expressed by some EU Member States to challenge major powers on burning issues. As the U.S. is a key trading partner and a military ally of EU Member States, initiating an ACI case against the U.S. could cause transatlantic relations to deteriorate to a point where it could be damaging for certain Member States. Some may also consider that such a procedure would give too much economic/geopolitical power to the Commission. In addition, some EU heads of state might prefer to engage in bilateral relations in the hope of securing a better trade deal.  

Further, for the ACI to be effective today and in the future, it must bear a sufficiently deterrent effect to prevent any further attempts of “coercion” from third countries. There is a lesson to be learned here from the EU’s disproportionate reliance in the past on TDIs. In particular, the EU steel safeguard measures, which are scheduled to lapse in mid-2026, have not in fact enabled the EU steel industry to adapt to the steel market realities, as it transpires from Eurofer’s latest lobbying efforts to maintain and restrict the measure, and have instead harmed the interests of EU users, importers and consumers.

With that in mind, any use of the ACI will be a real test for the credibility of the EU’s open strategic autonomy policy and for the political unity among Member States.