The EU’s Anti Coercion Instrument

Recent tensions over Greenland, heightened by US President Donald Trump’s now-rescinded threats to impose additional tariffs of 10% on goods from eight European countries, have revived discussion in Brussels on the EU’s Anti‑Coercion Instrument (ACI). This trade “bazooka”, formally adopted in 2023, is an untested but powerful tool for bolstering the bloc’s trade and economic security.

Discussions about an ACI first emerged after the first Trump administration imposed tariffs on European steel and aluminum and threatened sanctions against European companies involved in the construction of the Nord Stream 2 gas pipeline. The immediate catalyst for the ACI, however, was China’s informal economic retaliation against Lithuania in 2021 after Vilnius allowed Taipei to open a “Taiwanese Representative Office”, a designation Beijing opposed. Lithuania’s departure from the customary “Taipei” label quickly escalated into a diplomatic spat, prompting China to recall its ambassador, downgrade diplomatic relations, and impose trade restrictions on Lithuanian goods. Beijing also pressured European firms not to use Lithuanian components.

The ACI has since then repeatedly surfaced in strategic discussions as a way to respond to unfair US and Chinese economic practices.

Why was the ACI created?

The market economy has become a key arena for global competition among nations. Tariff hikes are replacing traditional trade policies. De-risking strategies and industrial policies are shifting patterns of investment and growth. The result is that economic coercion has become more prevalent as a means to advance political and economic interests and limit those of others.

The use of such coercion to exert political power highlighted a growing concern in Brussels that the EU lacked a fast, unified process to counter foreign political and economic pressure. To rectify this, the bloc began to develop a broader economic security strategy and to fashion new tools to defend, protect, and advance its interests. They included the ACI.

What counts as “economic coercion” under the ACI?

Under the regulation, economic coercion exists when a third country “seeks to pressure the [EU or a member state] into making a particular choice by applying, or threatening to apply, measures affecting trade or investment”. These measures can be formal or informal, and can affect any policy area, not just trade.

The regulation deems such practices to interfere unduly with the legitimate sovereign choices of the bloc and its member states. Crucially, it focuses on the purpose and effect of a coercive measure, not only on the scale of potential economic harm. A tariff, quota, licensing delay, or discriminatory inspection regime may qualify as coercive when clearly linked to an attempt to force policy change, even if its immediate commercial impact is limited.

How would the ACI work?

The ACI follows a step‑by‑step process designed to signal resolve while allowing for escalation and de‑escalation.

First, the European Commission (at the request of one or more member states or on its own initiative) examines whether a third‑country measure constitutes economic coercion. The Commission has four months to complete its examination, though this process can be accelerated. The regulation provides a single point of contact within the Directorate-General for Trade and Economic Security (DG Trade) for submissions concerning economic coercion.

If it concludes that coercion exists, the Commission presents a proposal to the Council of the EU (the body representing the 27 EU member state governments), which decides by quality majority voting (QMV; 55% of member states representing 65% of the EU population) if it agrees with the Commission’s assessment. The Council must make this determination in 8-10 weeks, though a quicker decision is possible. The timelines are indicative rather than fixed, giving room to slow or stop the procedure.

Once coercion is formally determined, the Commission must first seek to resolve the dispute through dialogue and engagement with the third country. The EU has exclusive competence for trade policy, which means the Commission has the authority to act on behalf of the 27 member states and the EU parliament, albeit in close and regular consultation with both. In particular, it must take full account of the positions of the member states and may not pursue actions that run counter to their collectively expressed will.

Only as a last resort may the Commission adopt countermeasures, which must be proportionate and reversible. But before doing so, the Commission must consult with stakeholders including economic operators, business associations, and consumers who are likely to be the first affected by retaliatory measures. Member states’ concerns and preferences also inform the selection and design of any measures.

By rooting the ACI in the EU’s Common Commercial Policy (CCP), for which QMV applies, Brussels seeks to sidestep the need for unanimity and prevent one or a minority of member states from blocking action. Targeted tools such as sanctions, in contrast, fall under the EU’s Common Foreign and Security Policy (CFSP), which requires approval of all member states.

The Commission is required to suspend or terminate measures once coercion ceases, a negotiated solution is reached, an international third-party adjudication decision requires it, or when doing so aligns with EU interests. The regulation also allows the bloc to seek reparations.

What measures can the EU deploy under the ACI?

The ACI gives the EU much broader retaliatory powers than traditional counter‑tariffs. The bloc’s options were previously limited, largely, to classic World Trade Organization (WTO)‑sanctioned trade-defense instruments such as anti‑dumping duties, anti‑subsidy measures, and safeguards, and CFSP mechanisms such as sanctions.

Under the ACI, possible measures include:

• imposition of new or increased customs duties (tariffs), or other charges having an equivalent effect, on imports or exports of goods from the coercing country
  restrictions on the import or export of goods through:
  • quantitative restrictions (quotas)
  • licensing requirements
  • export controls
  • transit restrictions
  • other limitations on shipments of goods
• restrictions on trade in services including limitations on:
  • the provision of services by service suppliers of the coercing country
  • market access or national treatment for such services
• restrictions on foreign direct investment including limitations on:
  • the establishment or operation of investments by persons or entities from the coercing country 
• measures affecting intellectual property rights (IPR), including:
  • suspending or withdrawing IPR as permitted by EU law
  • restricting the commercial exploitation of IPR
• public procurement and concession measures, including:
  • exclusion from EU public procurement procedures of economic operators, goods, services, or works from the coercing country
  • restrictions on participation in concession awards
• restrictions on access to EU funding, including:
  • exclusion from or limitations on participation in EU funded programs, grants, loans, or financial instruments
• regulatory, administrative, or procedural measures, including:
  • additional regulatory requirements
  • stricter conformity assessments
  • targeted enhanced checks, controls, or administrative burdens
• combinations of the aforementioned measures, provided they remain proportionate and consistent with EU and international law, tailored by:
  • sector
  • product
  • service
  • geographic scope
  • duration or conditionality

The EU’s single market counts roughly 450 million consumers. As a result, these tools can have significant extraterritorial impact, even targeting foreign businesses without European subsidiaries. US and Chinese services firms are particularly exposed because their home countries run sizeable services surpluses with the EU.

Is the ACI moving from deterrence to application?

EU officials consistently stress that the ACI’s primary aim is deterrence. The Commission’s own guidance notes that the instrument “will be most successful if there is no need to use it”, signaling that the existence of a clear, credible response mechanism is meant to dissuade coercive behavior.

This philosophy reflects experience from the Lithuania‑China dispute, when informal coercion was difficult to counter under existing WTO or EU frameworks. The ACI should shorten response times and raise the cost of coercion.

At the extraordinary European Council meeting held after the World Economic Forum annual meeting, EU leaders and member-state heads of state and government reportedly instructed the European Commission to accelerate preparations for implementing the ACI so that the bloc can rapidly deploy it if necessary.

Why is the ACI important now?

Debate on deploying the ACI has spread since Trump’s return to office. The EU almost activated the instrument after the United States imposed steep duties on imports from the bloc as part of the “Liberation Day” tariffs announced in April 2025. Although Washington and Brussels ultimately defused the dispute four months later through the Turnberry agreement, Trump’s threat to annex Greenland has again put the ACI’s relevance and utility into the spotlight.

More broadly, the ACI sits at the heart of the EU’s “economic security” agenda, alongside tools such as the Foreign Subsidies Regulation, International Procurement Instrument, and new export‑control and investment‑screening regimes. Together, they mark a shift away from a purely liberal trade framework in which trade leads to deeper political and economic integration, and toward a more “geopolitical” EU trade policy with a strong single market at its core.

The ACI’s novelty lies in the streamlining of decision‑making, less in the introduction of economic countermeasures. That is due to the QMV under which the ACI operates. This institutional design was deliberately chosen to enhance the EU’s deterrence capabilities in an era in which economic interdependencies can be, and are, weaponized.

The EU’s shift in approach coincides with a moment when economic coercion is more than a risk associated primarily with China. It is now an immediate challenge from the United States. Countermeasures targeting services trade and public procurement, two areas in which the United States runs a structural surplus with the EU, would inflict significant economic cost on American firms.

At the same time, the EU’s commitment to proportionality may undermine deterrence against actors willing to absorb economic pain for political gain. This is especially true for the United States, with which EU asymmetries in services trade, technology dependence, and financial markets complicate escalating a conflict. Transatlantic trade restrictions would seriously hurt European businesses and consumers.

The ACI’s importance today may lie as much in credible signaling as in actual deployment. Given the EU’s continued support for Ukraine and heightened sensitivity about transatlantic coordination, how the instrument is assessed and potentially yielded may shape the bloc’s approach to economic coercion in other geopolitical contexts. Simply initiating a formal investigation under the instrument would constitute a major political signal that Brussels is prepared to treat economic coercion consistently, regardless of the source.

The views expressed herein are those solely of the author(s). GMF as an institution does not take positions.