In response to President Trump’s threats to impose severe, across-the-board tariffs on goods from the European Union (EU), EU policymakers have warned that the EU may respond by deploying its “trade bazooka,” the EU Anti-Coercion Instrument. This could have an important impact on U.S. vendors in EU public procurement markets.
The EU Anti-Coercion Instrument is an EU regulation, formally Regulation (EU) 2023/2675 of the European Parliament and of the Council of 22 November 2023 on the protection of the Union and its Member States from economic coercion by third countries, which provides the EU with a range of remedies to deploy in the face of international trade “coercion.”
The European Commission describes the Anti-Coercion Instrument “first and foremost” as “a deterrent against economic coercion.” Where “coercion” occurs, the tool provides EU policymakers with a “structure to respond in a well-calibrated way to stop the coercion,” through a “a wide range of possible countermeasures when a country refuses to remove the coercion.” Besides tariffs, those counter-measures can include “restrictions on access to . . . public procurement.” The Anti-Coercion Instrument “provides a legal framework for responding to coercion and sets down the means for the EU to investigate and take decisions.” It includes timeframes and procedures for stakeholders to work with the Commission before the EU launches countermeasures, and “provides a framework for the EU to request a third country to repair the injury caused by its economic coercion.”
Under the Anti-Coercion Instrument, “economic coercion” occurs when another country “applies or threatens to apply a . . . measure affecting trade or investment” in order stop or curb an action by the EU or a Member State, “thereby interfering in the legitimate sovereign choices of the Union or a Member State.” Before deploying the Instrument, the EU is to take into account the “intensity, severity, frequency, duration, breadth and magnitude” of the other nation’s measures, whether the other nation “is engaging in a pattern of interference seeking to prevent or obtain particular acts” from the EU, its Member States or another nation, whether the “coercive” nation’s measures encroach “upon an area of the Union’s or a Member State’s sovereignty,” and whether the “coercive” nation has failed to make good-faith efforts to resolve the matter. European leaders and economists have argued that the Trump administration’s attacks against the EU meet all of those triggers.
The Anti-Coercion Instrument includes, in Annex I, potential countermeasures which would impact public procurement. Those countermeasures could be deployed despite potential violations of “applicable international obligations concerning the right to participate in tender procedures in the area of public procurement” — in other words, even if by taking those measures the EU risked violating the World Trade Organization (WTO) Government Procurement Agreement, which opens the EU and U.S. public procurement markets. (The Anti-Coercion Instrument does not explicitly address the bilateral reciprocal defense procurement agreements which are vital to open defense markets between the United States and its NATO allies.)
The Anti-Coercion Instrument says that, with regard to public procurement, “goods, services or suppliers” from a targeted “coercive” nation can be excluded from public procurements in the European Union. Alternatively, bids (tenders) that include goods or services from “coercive” nations can also be excluded, or the scoring evaluation of those bids can be adjusted.
If the EU deploys the Anti-Coercion Instrument against U.S.-based vendors, goods and services in EU Member State procurements, the consequences could be severe. European Commission data show that U.S. vendors, goods and services enjoy a substantial share of the EU public procurement markets, directly and indirectly. The coming weeks will be critical as the EU decides whether to use the Anti-Coercion Instrument to respond aggressively to perceived “coercion” from the Trump administration.
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