Bazooka

After United States President Donald Trump threatened a trade war against European countries which oppose his bid to acquire Greenland, Europe is now considering deploying a “trade bazooka” – a powerful, multilayered instrument in its arsenal of economic deterrents.

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.

Here is more about Trump’s tariff threat to Europe, alongside Europe’s response.

What was in Trump’s Norway letter over Greenland?

Norwegian Prime Minister Jonas Gahr Store’s office confirmed on Monday that he had received a message from Trump in which he wrote: “Considering your Country decided not to give me the Nobel Peace Prize for having stopped 8 Wars PLUS, I no longer feel an obligation to think purely of Peace.”

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 reiterated that he does not believe Denmark can keep Greenland secure from Russia or China.

“The World is not secure unless we have Complete and Total Control of Greenland,” he wrote.

What tariffs has Trump threatened 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 wrote that, starting from February 1, exports to the US from Denmark, Norway, Sweden, France, Germany, the United Kingdom, the Netherlands and Finland would all be subject to a 10 percent levy.

On June 1 this year, the tariff would be increased to 25 percent, he said. “This Tariff will be due and payable until such time as a Deal is reached for the Complete and Total purchase of Greenland,” Trump wrote.

“The United States has been trying to do this transaction for over 150 years. Many Presidents have tried, and for good reason, but Denmark 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 does the US want to buy Greenland?

The US interest is longstanding: after buying Alaska in 1867, Secretary of State William Seward unsuccessfully tried to buy Greenland. In 1946, President Harry Truman secretly offered Denmark $100m for Greenland, but Copenhagen refused, and the proposal became public only decades later.

During World War II, the US occupied the island and built military facilities, maintaining a presence today at Pituffik Space Base.

Greenland, a sparsely populated Arctic island of 56,000 people – mostly Indigenous Inuit – is geographically in North America but politically part of Denmark, making it 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.

Its position between the Arctic and North Atlantic oceans provides the shortest air and sea routes between North America and Europe, making it crucial for US military operations and early-warning systems, especially around the Greenland-Iceland-UK gap, according to the Trump administration.

Greenland’s economy relies mainly on fishing, locals oppose large-scale mining, and there is no oil or gas extraction. However, it has large deposits of minerals, including rare-earth metals, which are necessary for the manufacture of technology, including smartphones and fighter planes. 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 tariff threat?

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.

“Our priority is to engage, not escalate. Sometimes the most responsible form of leadership is restraint,” European Commission spokesperson Olof Gill said on Monday.

However, Gill warned that “the EU has tools at its disposal and is prepared to respond should the threatened tariffs be imposed”.

The 27 members of the EU convened for an emergency meeting on Sunday to discuss their response to Trump’s threat.

In a joint statement on the same day, the eight countries targeted by Trump with new tariffs said they “stand in full solidarity” with Denmark and the people 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.

“Tariff threats undermine transatlantic relations and risk a dangerous downward spiral. We will continue to stand united and coordinated in our response. We are committed to upholding our sovereignty.”

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.

“Applying tariffs on allies for pursuing the collective security of NATO allies is completely wrong. We will of course be pursuing this directly with the US administration,” Starmer said. However, he stated repeatedly during his address and questions from the media afterwards that, for now, he is not in favour of launching retaliatory tariffs against the US. “A tariff war is not in anyone’s interests.”

This week, German Chancellor Friedrich Merz also urged dialogue, warning that a tariff war would hurt both sides of the Atlantic Ocean.

“We want to avoid any escalation in this dispute if at all possible,” Merz said. “We simply want to try to resolve this problem together.” He did not rule out using tariffs if absolutely necessary, however.

European Commission President Ursula von der Leyen and European Council President Antonio Costa wrote identical, but separate X posts, saying: “Tariffs would undermine transatlantic relations and risk a dangerous downward spiral. Europe will remain united, coordinated, and committed to upholding its sovereignty.”

Some European leaders have been more bullish about how to respond to Trump’s threats, however, and called on the EU to activate a never-before-used economic tool designed to face down coercion from states outside the EU.

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 doesn’t help the alliance [NATO], and it also doesn’t help Greenland.”

“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 call on the European Commission to activate it immediately.”

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 ACI, or trade bazooka?

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 launched a trade war against several of Washington’s leading trading partners, including the EU, which faced US tariffs on steel and aluminium 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 retaliation for Lithuania’s decision to allow Taiwan, which China considers its territory, to open a de facto embassy 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.

The bazooka idea was proposed in the EU on December 8, 2021, as China was blocking goods.

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 restricts the access of US corporations to sell products in the European market. 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 fees and charges on imports of goods and services, restrictions on US investment into the EU and a possible ban on public sector contracts for US companies.”

Essentially, the trade bazooka involves a series of measures, including steep retaliatory tariffs and increased customs duties. If applied to the US, the EU could limit or block access for US goods, services or companies to its single market.

It could also place restrictions on exports and imports through quotas or licences. Additionally, the EU could impose measures restricting the US’s use of EU‑based financial infrastructure, increasing funding costs for US banks and firms which depend on doing business in Europe.

How would the ACI be implemented?

A last‑resort deterrence measure, it has never been implemented before. There are several steps that must be taken before it can be deployed.

The process begins when a company, another party in the EU or the Commission itself files a complaint alleging economic coercion from a country outside the EU. The European Commission then launches a formal investigation into the allegation, which it is supposed to complete within four months.

If the commission finds that economic coercion is indeed taking place, it will first try to resolve the issue through diplomacy. If those efforts fail, the EU can move towards activating the ACI.

To do so, a “qualified majority” – at least 15 of the EU’s 27 countries representing at least 65 percent of the bloc’s population – must support the move. This gives countries with larger populations, such as Germany, France and Italy, significant influence.

Once a proposal to trigger the bazooka is on the table, member states have up to 10 weeks to say yes or no. In total, the entire process can take up to a year before the bazooka fully comes into effect.

“The EC may be able to move relatively quickly given the urgency of the situation, but the implementation vote may be months rather than weeks away,” Michell said.

What effect could the ACI have on the US and Europe?

The US runs a significant trade deficit with the EU in terms of goods. This means it imports more from the EU than it exports.

In 2024, the EU exported 531.6 billion euros ($603bn) in goods to the US and imported products worth 333 billion euros ($377.8bn), resulting in a trade surplus for the EU of almost 200 billion euros ($227bn).

The picture is different for services, however. The US had a surplus of more than 109 billion euros ($124bn) in services as of 2023, with notable IT exports, led by large 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.

“Imposing restrictions on the large US tech companies would be particularly painful for the US, and would likely hit share prices. The US is also exposed in areas such as pharmaceuticals and aerospace,” Michell said.

However, the bazooka would hurt workers and consumers in Europe as well. Restrictions on services would mean limited choices or higher prices for US services. Additionally, retaliatory tariffs on US goods as well would mean increased prices for those, too.

What will Europe choose to do?

UK financial media reported this week that the bloc is considering imposing 93 billion euros ($108bn) in tariffs on US goods.

“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.

“Anti-coercion measures need a qualified majority [in the EU]. Germany has already said that it would prefer negotiations. Hence, my base case remains that the bazooka is unlikely to be used,” Kumar said.

“My base case remains that cooler heads will prevail. A solution where the US gets exclusive mineral rights and increased military presence in Greenland but its sovereignty remaining as is could be a way forward,” Kumar said.