EU Response to Tariffs: Retaliatory Measures Could Hit Big Tech Hardest

Key Takeaways

• EU leaders have suggested countermeasures against U.S. tariffs could target Big Tech.
• In one scenario, the EU may impose an additional tax on American Big Tech firms.
• If the European Council triggers the Anti-Coercion Instrument, the EU will have broad leeway to target U.S. firms.

In the wake of Donald Trump’s tariffs announcement on Wednesday, April 2, European leaders have been scrambling to respond.

To avoid a tit-for-tat trade war that could do lasting damage to the economy, EU policymakers are considering alternative retaliatory measures that target American Big Tech firms.

Goods and Services in the Transatlantic Trade War

When Washington announced a tax on European steel and aluminum in March, the EU responded with reciprocal tariffs on a range of industrial and agricultural products.

But taking a longer-term view of the transatlantic trade war, volleying tariffs and counter tariffs back and forth is a losing strategy for the EU. That’s because the bloc maintains a $235.6 billion surplus in goods traded with the U.S.

However, when services are considered, the picture is much more balanced, with the EU operating a services trade deficit of €109 billion in 2023.

Based on this discrepancy, the service sector offers the EU an ideal leverage point for countering U.S. tariffs, and Silicon Valley software giants are a natural target.

Big Tech an Ideal Target

Digital services aren’t the only services the EU could target with reciprocal trade barriers. American financial institutions also do a lot of business with the EU that policymakers could look to throttle.

But Big Tech is nothing like the financial sector, where European firms play a significant role in the global economy.

European lawmakers have long criticized the dominance of a handful of Silicon Valley giants, which they argue stifles competition and suppresses the EU tech sector.

Even before Donald Trump kicked off the latest transatlantic trade war, EU regulations like the Digital Markets Act directly targeted American businesses, much to the chagrin of the U.S. administration.

As a sign that the EU is preparing a targeted response to recent tariffs, a spokesperson for the French government suggested that countermeasures would “attack” online services.

German Vice Chancellor Robert Habeck also singled out American technology giants for potential levies, noting that “the big tech companies have an incredible dominance in Europe and are largely exempt from European taxes.”

The EU’s Secret Weapon

In 2023, the EU introduced its “Anti-Coercion Instrumen t” (ACI) as a “means to deter and respond to economic coercion.”

So far, the ACI has never been used, and there is a high bar for designating countries like the U.S. as coercive trade partners.

Under the EU’s qualified majority voting rules, implementing the ACI would require the consent of at least 15 out of 27 member states, with France and Germany essentially holding veto power due to their larger populations.

If it is triggered, however, the European Commission will have broad leeway to respond to Trump’s tariffs as it sees fit. For example, it could impose additional taxes on American Big Tech companies.

Enhanced Regulatory Enforcement

If the EU’s nuclear option is to impose a retaliatory tax on Big Tech firms, it could also pull other, more roundabout levers.

American companies, including Apple, Meta, Google and X are currently the subject of ongoing regulatory probes that could result in hefty fines.

EU courts may also invalidate the transatlantic data privacy framework that American firms rely on to export EU users’ data to the U.S.

Applying regulatory pressure would be consistent with the EU’s approach to Big Tech in recent years.

Antitrust fines and privacy requirements have caused trouble for American tech giants.

Thanks to the Digital Markets Act and the Digital Services Act, the European Commission is better equipped than ever to make life difficult for U.S. businesses.