The EU’s Anti-Coercion Instrument: What it Means for Tech and Tariffs

By Paul Steidler: The European Union’s (EU’s) Anti-Coercion Instrument (ACI) is being widely categorized in the media as Europe’s “nuclear option” or “bazooka” for taking on the Trump Administration when it comes to tariffs.

It is not. In fact, the main damage done by unleashing this radical measure would be to Europe’s business reputation, putting it on par with China for lawlessness and intellectual property theft.

First, some background.

The ACI was conceived and gained momentum following China’s imposition of trade restrictions on Lithuania in 2021 after it expanded its economic relationship with Taiwan. The European Parliament touted it as “the EU’s new weapon to protect trade” and the measure became law on December 27, 2023.

In a press release announcing the new law, the European Commission acknowledged the measure allows for “restrictions on trade in services and trade-related aspects of intellectual property rights.”

Indeed, the underlying statute gives the EU the right to shred companies’ intellectual property rights. The law permits: “The imposition of restrictions on the protection of intellectual property rights or their commercial exploitation, in relation to the rightholders that are nationals of the third country concerned, which may amount, as necessary, to the non-performance of applicable international obligations with respect to trade-related aspects of intellectual property rights.”

Furthermore, the ACI moves slowly. The European Commission, the EU’s main executive government branch, says, “Following a formal proposal from the Commission, the Council determines the existence of economic coercion via an implementing act. The Council should act expeditiously. It has a maximum of 8 to 10 weeks to complete this step.”

Simply put, U.S. companies will not sit around for two to three months and pliantly allow their intellectual property (IP) to be compromised. Any near-term benefit that the EU would potentially get would come at the expense of losing its business reputation as a place where IP is protected.

The emphasis on the ACI may be a strategic maneuver by some European officials. A more practical and likely scenario in which the EU could attack U.S. tech companies is through the existing Digital Markets Act (DMA) and Digital Services Act (DSA) which have already been used for substantial, arbitrary fines.

The EU has pushed the ruse that these measures are about protecting consumers. Turning to U.S. tech companies for more cash in a tariff war would end this façade and be costly for Europe’s reputation, as would the ACI.

The ACI is a time-consuming, poorly targeted nuclear option. Furthermore, it is a nuclear option by committee and drawn-out processes. The Trump Administration should take as tough a view to that as it has the DMA, DSA, and other measures.