At the start of President Trump’s term, his allies feared his isolationist streak. Now, most of them probably wish that was all they had to deal with. Though many hoped the President’s rhetoric would cool on Greenland, especially as the proposal is facing intense scrutiny domestically, that has not been the case, and now the EU is considering locking and loading their infamous “trade bazooka,” or the ACI (Anti-Coercion Instrument). Originally conceived in response to the Chinese government pressuring Lithuania after they allowed Taiwan to open a representative office in Vilnius, this tool is meant to be used against any outsider that tries to economically coerce one or several members of the EU. It is a tool of last resort, and gives the EU broad powers to impose tariffs, restrict imports as well as exports on both goods and services, or otherwise curb access to the single market and its 450 million consumers. Measures can also include limiting access to EU public procurement, suspending licenses, restricting investment or funding flows, and constraining the operations of foreign firms (for example in tech, banking or digital services).
Even as the tone on Greenland was heating up late December, using the bazooka was not even on the map. However, when President Trump threatened 10% tariffs on eight member countries of the EU (due to be implemented on the 1st of February), suddenly the US reached the criteria for a tool that was originally conceived to deter China. President Macron urged the EU to implement it, but after a tense meeting it was decided to retaliate with tariffs of their own to the tune of around $100 billion. While the EU practices caution, the question remains: what would the “trade bazooka” look like if implemented against the US, and how would it affect the Nordics?
What It Would Look Like
The ACI is designed to be somewhat flexible in order to specifically target the pain points of whichever third-party country is coercing a member. The EU most likely never imagined using the ACI against the US, and so there are no officially confirmed plans. However, taking a quick look at what is important to the President, in addition to the current sanctions package which was designed earlier in 2025 as a potential response to the first wave of American tariffs, one could make a qualified guess.
The first response is most likely to expand the current package, which places sanctions on sectors like the automotive industry, agriculture, aviation and iconic consumer products (e.g. bourbon, Harley‑Davidson‑type goods). These tariffs are specifically designed to target swing-states and maximise pressure on them, while leaving room for additional tariffs. However, further tariffs on critical industries such as these would be too much of a shock for an already strained supply chain, and so for their next move they would likely start attacking services, the primary driver of the American economy. This would hurt particularly badly on both sides, as Europeans and Americans alike would have to scramble to find replacements (something that would be slightly easier for Europe, as they are deepening their relationships with other snubbed allies of the US, such as Canada and Australia). They could do this through a mix of extra charges, license hurdles and outright access restrictions that raise costs or block specific activities for US firms in the EU market. They would, most likely, target companies like Meta, for their closeness to the President with the hope that they would convince him to change his mind once their wallets start hurting.
Furthermore, they may limit the types of business American companies can conduct in the EU, such as limiting or curtailing investment from and towards the US or effectively ban American businesses from being able to partake in European government projects. Many industries and European countries rely heavily on American investment and could be badly affected, however this could also increase demand for European technology firms in the long term.
The final, equally devastating option, is for EU countries to dump their bonds in the US treasury in a coordinated boycott. Europe holds an estimated $8-12 trillion in bonds (including broader bonds and equities, otherwise the number looks more like $2.8 trillion). This would devastate both countries: European pension funds would lose potentially hundreds of billions of dollars, American mortgage rates would spike and fuel inflation, and the dollar may lose its safe-haven status. No rational actor would execute a full fire sale, as the global benchmark status of Treasuries means yield spikes reverberate everywhere, tightening conditions for leveraged players on both sides of the Atlantic and undermining the post-2008 financial stability framework.
What It Means for Us
The scenarios are too many to count, but they all look mostly the same: really bad. When two economies are as intertwined as the European and American are, the trade bazooka is not so much a weapon as it is a suicide vest. The explosion will, undoubtedly, irreparably harm both sides. The Nordics are small, and reliant on exports. Furthermore, Sweden in particular has a strong foothold in the American economy through its exports of software, something that could be badly affected by sudden limitations in either direction. Although it could potentially give European tech some breathing room by limiting American competition in Europe itself, they are also deeply intertwined with the US and would feel the effects most keenly, at least in the beginning. In the long term, though, they may get a headstart in the European market.
Beyond software and services, the Nordics also rely heavily on America as a partner in the exporting of goods. Particularly Swedish steel, Danish shipping and Finnish paper would be affected. The economies of these countries are just barely recovering from high inflation and are now battling high unemployment instead, and so it would be particularly infuriating for their populations, which would risk the positions of the incumbent governments in the Swedish and Danish elections later this year. However, not standing up to President Trump risks their position in equal measure. Truly, a rock and a hard place. Their only solace can rest in the fact that it’s currently unclear how one would go about effectively placing tariffs on individual members of the EU.
If it could be avoided, the Nordic nations would rather not use the ACI – however, Greenland is a line in the sand. It is made all the harder by the unclear motivations of the President, who claims everything from national security (they can already place an unlimited number of bases on Greenland, if they only ask) to rare earth minerals (they are frozen under a thick sheet of ice that will take decades to fully thaw, not to mention the lack of extraction infrastructure). In the end, the trade bazooka is less about winning than about deterrence, and its mere existence may be the EU’s strongest hope of forcing Washington back to the negotiating table before real damage is done. For small, exposed economies in Northern Europe, restraint may be painful, but escalation could prove catastrophic. The US may be about to find out just how painful it can get for them, too.