Will Europe’s trade moves hurt US tech?

Last month, after the Trump Administration indicated it might impose tariffs on nations opposing any annexation of Greenland, European leaders considered deploying the region’s formidable “trade bazooka.” This potent retaliation mechanism could potentially target American technology firms operating within the European Union. 

Launched in 2023 and yet to be invoked, the anti-coercion instrument aims to discourage foreign governments from wielding economic influence over EU member states. This legal framework empowers the EU to enact a wide array of reciprocal economic limitations, enabling a stronger response independent of conventional trade dispute protocols.  

Such countermeasures could extend across numerous industries. Specifically, in the context of the US, technology services—encompassing cloud computing and software—are identified as potential areas for intervention. 

“Should the aim be to target and impact the US, the technology sector and digital services represent the most logical avenues,” stated Holger Görg, a professor of International Economics at the University of Kiel and the director of the “International Trade and Investment” research group at Kiel Institute. 

The European Union and the United States maintain the globe’s most extensive bilateral trade relationship. However, while the US experiences a substantial goods trade deficit with the EU—encompassing diverse products from German automobiles to Italian vintages—the scenario shifts for services. In this domain, the US recorded a €109 billion surplus in 2023, approximately $120 billion. (According to the European Council, citing EuroStat data, the EU’s services deficit reached €148 billion in 2024, roughly $158 billion. These deficit figures can vary by source.)

The consideration among European leaders to initiate severe economic measures emerged following repeated assertions by US President Donald J. Trump regarding his desire for the United States to acquire Greenland, an autonomous Danish territory. While Danish and other European officials have unequivocally dismissed this proposal, Trump continues to discuss it as a potentiality.

Approximately three-quarters of the entire EU-US service trade comprises “digitally deliverable services,” based on Eurostat data referenced in a Kiel Institute analysis. This expansive classification includes cloud computing and enterprise software, among other services delivered remotely. 

“The US stands as a major exporter of services and technology,” Görg noted. “These corporations heavily depend on global markets; restricting such access would be significantly disruptive.”

Beyond its direct economic ramifications, this instrument could furnish the EU with significant leverage over industries whose constituent companies might, in turn, influence their respective governments politically. 

“It is almost entirely certain that the Commission is currently evaluating [which sectors it might target],” stated Dylan Geraets, a counsel at the international law firm Mayer Brown. “If this assessment indicates that cloud computing would face severe adverse effects—and could plausibly compel the US government to cease the conduct the EU is attributing to it—then that sector would certainly be considered.” 

What Responses Could the EU Employ?

The regulatory framework outlines various countermeasures applicable to technology services (further specifics can be found in Annex 1 of the regulation document).

A potential action involves elevating customs duties and imposing extra fees on imports. Furthermore, the Commission could bar US technology firms from the European market, for instance, by excluding them from public sector procurement bids. This could manifest as an outright prohibition or apply to contracts not exceeding a specific value, as explained by Geraets.

Additional prospective measures encompass restricting US tech companies’ capacity for European investment—such as precluding the acquisition of startups within EU member states—or imposing limitations on the expansion of their EU operations. 

Any actions designed to limit access to US technology services or inflate their costs would “carry substantial implications” for European technology consumers, Görg remarked. 

“Should the EU proceed with a digital services tax or curb access for US companies, it would severely detriment both the public sector and numerous private enterprises within the region,” he commented. “This outcome is typical: entities imposing trade restrictions often inflict harm upon themselves—potentially the most, and undeniably to a considerable extent.” 

A pivotal, unresolved question remains whether the EU would genuinely impose limitations on a technology sector upon which it has grown so dependent. 

Despite a notable surge in European organizations’ interest in digital sovereignty—and concrete initiatives to advance it, like the French government’s strategy to swap Microsoft Teams for 200,000 employees—the fact remains that numerous private and public entities heavily rely on US technology providers.

Consequently, limitations on consumer digital services, such as those offered by US social media firms, appear more probable than those impacting business technology providers, observed Dario Maisto, a senior analyst at Forrester. “How many businesses today can function without the Microsoft suite?” he queried, referencing Airbus’ nearly decade-long effort to transition from Microsoft’s productivity applications to Google’s counterpart. 

European clients presently perceive limited alternatives that offer comparable feature parity with Microsoft’s software ecosystem, he stated. “Attempting to migrate from Excel to Google Sheets, for example, would entail months of ongoing projects merely to replicate Excel’s macros. So, how feasible is such a transition?” Maisto questioned. “Tariffs can be imposed if viable alternatives exist—if the aim is to favor a different market option—but currently, no such equivalent exists.”

Strategic Ambiguity: A Potential Advantage

Given that this instrument remains unprecedented in its application, the practical implementation of its measures—and the extent to which the EU is prepared to escalate—remains undefined. This inherent ambiguity, Geraets suggests, could serve as an advantage for the Commission. “This very uncertainty is precisely the deterrent impact the EU aims to achieve,” he commented. “At this juncture, the full scope of its potential application is largely speculative.”

The intensity of any retaliatory action would correlate with the character and magnitude of harm inflicted by an act of economic coercion. Precisely how the EU intends to ascertain an appropriate response, however, remains unarticulated. 

“How does one quantify, for instance, the loss of Greenland, or the financial outlay necessary to prevent such a loss? That presents an exceptionally challenging task,” Geraets remarked. 

This uncertainty also grants the Commission considerable latitude in formulating its response. Such flexibility creates an opportunity for lobbyists to advocate for the exclusion of specific sectors from any impending sanctions. “Were the US tech industry to become a target, one can be quite certain of extensive lobbying efforts directed at the Commission to prevent such an outcome,” he noted. 

In principle, any implemented measures would be provisional. The Commission is mandated to consistently evaluate ongoing economic coercion and the efficacy of the EU’s counteraction. It must discontinue employing the instrument once the coercive conduct ceases. 

“Ultimately, the objective is to eliminate the coercive behavior,” Geraets concluded. “This instrument is not intended as a punitive tool, at least not in the EU’s official framing. Instead, its primary goal is to ensure that the economic coercion currently being exerted is brought to an end.”