EU prepares $109B in counter-tariffs as Aug. 1 deadline looms without trade agreement

BRUSSELS, July 26 — With just days left before U.S. tariffs of up to 30% are set to hit European imports, the European Union is preparing for a no-deal trade scenario with the United States — and its response could be swift and substantial.

On Thursday, EU member states approved a 93 billion euro ($109 billion) counter-tariff package targeting a wide array of American goods, including food, clothing, alcohol, cars, and machinery. The bloc is also reportedly discussing the activation of its “trade bazooka” — the Anti-Coercion Instrument (ACI) — a last-resort tool designed to deter economic coercion by foreign governments.

🔺 EU Retaliation Strategy

According to sources cited by CNBC, the EU’s proposed countermeasures are designed to mirror U.S. tariff levels, with some duties reaching as high as 30%. ING’s Global Head of Macro, Carsten Brzeski, said the EU would likely adopt a “tit-for-tat” approach: targeted but proportionate, aiming to show resolve without escalating beyond U.S. measures.

“European countries are not fully aligned on how to react,” Brzeski noted. “I see the EU trying to find a balance — showing it reacts, but without overreaching.”

🧨 The “Trade Bazooka”

The Anti-Coercion Instrument (ACI), dubbed the EU’s “trade bazooka,” allows the Commission to formally label acts of economic coercion and respond with countermeasures. While intended as a deterrent, the ACI includes powerful tools such as export restrictions and market access curbs.

Alberto Rizzi, policy fellow at the European Council on Foreign Relations, emphasized that while the ACI is seen as a nuclear option, its use could be flexible and delayed:

“The ACI will likely be used as leverage, not activated immediately,” he said. “Retaliation is seen as a negotiating tool.”

🔁 Ongoing Talks, Uncertain Outcomes

Despite hardline preparations, last-minute negotiations are ongoing. A base-case scenario under discussion includes a 15% tariff on EU goods instead of the full 30%, though exemptions and final terms remain undecided.

Ultimately, the outcome depends on President Trump, known for abrupt policy shifts and unpredictable decision-making. Until a deal is finalized — or officially abandoned — Europe’s dual-track strategy of preparation and pressure remains in play.