Europe is mobilising its most formidable economic weaponry in response to Donald Trump's escalating tariff threats concerning Greenland, with Germany and France leading the charge for a robust retaliatory stance. The continent's leaders are preparing to deploy what has been termed the 'trade bazooka' – officially known as the Anti-Coercion Instrument – in a significant escalation of the transatlantic trade dispute.
Diplomatic Push for Economic Armament
According to five diplomats who spoke to Politico, Germany and France will formally present their proposal to the European Commission in Brussels on Thursday evening. The two powerhouse nations are advocating for the commission to be fully armed with this powerful economic instrument, believing it essential for countering what they perceive as coercive tactics from the United States.
Friedrich Merz, the German Chancellor, emphasised earlier this week that while Europe possesses a comprehensive set of economic instruments, their use remains a measure of last resort. "We have a set of instruments at our disposal," Merz stated. "We do not want to use them. But if we have to use them, then we will."
The Davos Détente and Ongoing Threats
In a potential sign of de-escalation, President Trump adopted a more measured tone during his keynote address at the World Economic Forum in Davos on Wednesday. "I don't have to use force, I don't want to use force, I won't use force," Trump declared at the Swiss resort. "All the United States is asking for is a place called Greenland."
Despite this rhetorical softening, the underlying tariff threats remain firmly in place. Trump continues to threaten imposing a 10 percent levy on eight European countries – including the United Kingdom, France, and Germany – starting February 1, with plans to increase this to 25 percent by June unless the United States is permitted to purchase Greenland.
The Mechanics of the 'Trade Bazooka'
Europe's proposed economic response encompasses a comprehensive array of punitive measures designed to exert significant pressure on American interests. The Anti-Coercion Instrument package includes:
- A series of targeted tariff increases on American goods
- Strategic export restrictions affecting key US industries
- Exclusion of American companies from high-value European contracts
This untested economic weapon represents uncharted territory in transatlantic relations. With US-EU bilateral trade in goods and services reaching approximately $665 billion in 2024, analysts suggest that broad restrictions could potentially cause tens to hundreds of billions of dollars in annual losses to US export revenues, particularly in specifically targeted sectors.
Diplomatic Manoeuvres and Alternative Approaches
European leaders have been actively pursuing diplomatic channels to defuse the escalating situation. Several have attempted to arrange sideline meetings with President Trump during his brief attendance at the 2026 World Economic Forum in Davos, hoping to persuade him to withdraw the Greenland-related tariff threats.
Meanwhile, two EU diplomats have revealed that European leaders have discussed implementing an initial retaliation package as an intermediate step. This would involve imposing tariffs on approximately $108 billion worth of US exports while the commission navigates the complex process required to activate the full Anti-Coercion Instrument.
Activating this powerful economic weapon would require securing support from at least 15 countries within the EU Council, presenting a significant diplomatic challenge for proponents of the measure.
Geopolitical Undercurrents and Security Concerns
The dispute centres on Greenland, an autonomous Danish territory that has become an unexpected flashpoint in international relations. President Trump maintains that the United States requires complete control of Greenland for Northern Atlantic security, citing increasing threats from Russia and China.
"If the US doesn't take Greenland, then one of the foreign adversaries eventually will by use of force," Trump has argued, framing the issue as a matter of national security imperative.
Beyond military force, the American president has floated alternative approaches including purchasing Greenland from Denmark, with some reports suggesting he might consider direct payments to Greenlanders to facilitate the territory's acquisition.
However, leaders in both Denmark and Greenland have repeatedly emphasised their complete lack of interest in transferring control of the Arctic territory to the United States, creating a fundamental impasse in negotiations.
European Unity and Resolve
Berlin's decision to join Paris in backing trade punishment against the United States represents a significant step toward a more forceful European response to Trump's escalated rhetoric. "The resolve has been there for a few days," one diplomat told Politico. "We have felt it in our bilateral talks ... there is very broad support that the EU must prepare for all scenarios, and that also includes that all instruments are on the table."
French President Emmanuel Macron and German Chancellor Friedrich Merz are poised to formally request that the European Commission prepare to impose retaliatory trade actions against the United States during their Brussels meeting. Their coordinated approach signals a strengthening of European unity in the face of what many perceive as economic coercion.
As the situation continues to evolve, the world watches closely to see whether diplomatic efforts will prevail or whether Europe will indeed unleash its formidable 'trade bazooka' in what could become one of the most significant economic confrontations of the decade.
