Europe maps its leverage against Trump trade threats

On 13 March, Donald Trump posted on Truth Social that the European Union is "one of the most hostile and abusive taxing and tariffing authorities in the world" and claimed it "was formed for the sole purpose of taking advantage of the United States". The broadside was not an outlier. It followed a 25 per cent levy on European steel and aluminium that had already taken effect, and it signalled that the trade wars the second Trump administration opened against Canada, China and Mexico are now turning decisively toward Europe.

A policy brief published on 20 March by the European Council on Foreign Relations argues that the EU possesses more leverage than the White House assumes. The paper, titled "Brussels hold'em: European cards against Trumpian coercion", maps the union's economic and regulatory tools across five domains and contends that credible deterrence, not hope of US domestic backlash, is the only language the administration understands.

The cards metaphor and the reality of escalation

Trump's worldview reduces international relations to a poker game. In a 28 February Oval Office exchange with Volodymyr Zelensky, he told the Ukrainian leader: "You don't have the cards." Cards, in this lexicon, are power and the willingness to use it aggressively. At a subsequent press briefing, asked what would happen if Europe retaliated against US tariffs, Trump replied: "They can't. They can try. But they can't. [...] We are the pot of gold. We're the one that everybody wants. [...] We just go cold turkey; we don't buy anymore. And if that happens, we win."

The ECFR brief treats this claim of escalation dominance as the central proposition to test. It acknowledges that the US holds a superior position across military, diplomatic, economic and technological fronts. But it argues that Europe commands chokepoints of its own, significant aspects of American prosperity and geopolitical power have benefited for decades from good relations with the continent. The task is to demonstrate what the authors call "mutual asymmetric dependency": a deterrence logic analogous to nuclear mutual assured destruction, but economic and regulatory rather than military.

Trade and tariff tools: the Anti-Coercion Instrument and beyond

The most prominent new instrument is the Anti-Coercion Instrument (ACI), which entered into force in December 2023. Sometimes dubbed the "bazooka", it gives the union a structured process for calibrating collective responses, including counter-tariffs, to detrimental third-country policies. It operates alongside the Enforcement Regulation, which allows the Commission to impose countermeasures when the World Trade Organization dispute settlement system is paralysed, as it has been since the US blocked appellate body appointments.

Beyond tariffs, the EU can weaponise its regulatory standards. The Farm to Fork Strategy, the Emissions Trading Scheme (EU ETS), the REACH chemicals regulation and the Ecodesign for Sustainable Products Regulation (ESPR) all limit market access for products that fail European sustainability criteria. Applied selectively, these become leverage points against American exporters. The Carbon Border Adjustment Mechanism (CBAM), which enters full force in 2026, adds a carbon tariff dimension that will affect US steel, aluminium, cement and electricity imports.

Digital and services leverage: DSA, DMA and the data regime

Two regulations give the Commission direct authority over the large American platforms that dominate European digital markets. The Digital Services Act (DSA) regulates online marketplaces, social networks and content-sharing platforms. The Digital Markets Act (DMA) imposes obligations on designated "gatekeepers", currently Alphabet, Amazon, Apple, ByteDance, Meta and Microsoft, to ensure fair access to the single market. The Commission can fine non-compliant firms up to 10 per cent of global annual turnover, rising to 20 per cent for repeated infringements.

Complementary levers include the General Data Protection Regulation (GDPR), which governs data transfers and processing, and the NIS2 Directive, a unified cybersecurity framework covering 18 critical sectors. National authorities enforce both, with EU-level coordination. The Vertical Block Exemption Regulation (VBER) provides competition law exemptions that could be adjusted to disadvantage US firms in specific vertical agreements.

Critical technology, defence procurement and investment screening

Europe's defence industrial base is a direct channel of leverage. The Permanent Structured Cooperation (PESCO) framework, the European Defence Fund (EDF) and the new ReArm Europe financing initiative can steer procurement away from US suppliers. Article 346 of the Treaty on the Functioning of the European Union exempts military procurement from certain single-market rules, giving member states legal cover for "buy European" preferences. The EU Agency for Cybersecurity (ENISA) certification scheme, the Dual-Use Regulation on sensitive technology exports and the Foreign Direct Investment (FDI) screening regulation add further layers of control over American access to strategic assets.

Civilian instruments reinforce the military ones. The International Procurement Instrument (IPI) enables tit-for-tat market restrictions against countries that close their procurement to European firms. The Foreign Subsidies Regulation (FSR), recently implemented, allows the Commission to investigate and remedy distortions caused by foreign state backing, a tool explicitly designed with China in mind but applicable to US subsidy programmes such as the Inflation Reduction Act. The Methane Regulation and CBAM extend the reach into energy and heavy industry.

Financial leverage: debt holdings, dollar dependence and crypto

The brief identifies a financial dimension that receives less public attention. The Capital Requirements Directive and Regulation (CRD/CRR) and Solvency II set prudential standards for banks and insurers, including risk weightings on sovereign exposures. Adjusting these could incentivise European institutions to reduce US Treasury holdings and dollar-denominated assets. The European Central Bank's currency swap lines, currently used to ensure dollar liquidity, could be recalibrated to promote euro-denominated transactions and collateral, gradually weakening the dollar's reserve currency privilege.

Anti-Money Laundering directives and the Markets in Crypto-Assets Regulation (MiCA) target hot money flows and the cryptocurrency sector, an area where the Trump administration and its allies have significant financial interests. The EU sanctions tool under the Common Foreign and Security Policy provides a further mechanism to restrict financial access for designated entities.

The 2018 precedent and the limits of analogy

The brief recalls that Jean-Claude Juncker, as Commission president, travelled to Washington in July 2018 with a "basket of threats and offers" that deterred the first Trump administration from imposing threatened tariffs on European cars. The episode proves Europe can play the game. But the authors caution that the second Trump administration is "markedly more aggressive and unchecked", while the EU has also evolved, acquiring the ACI, the FDI regulation, the FSR and a harder geoeconomic edge. What worked seven years ago would likely be insufficient now; the question is whether the expanded toolkit is sufficient for the new threat level.

Self-damage scores and the politics of distribution

Each tool in the ECFR tables carries an indicative self-damage score from 1 to 10. None is risk-free. The distribution of costs across member states varies: tariff retaliation on bourbon or motorcycles hits specific regions; restricting US cloud providers affects digital infrastructure unevenly; financial measures impact banking centres differently. The brief stresses that these scores warrant further research and that the political management of internal burden-sharing will be as difficult as the external confrontation.