EU looks to hit Big Tech in crackdown on US services exports

Unlock the White House Watch newsletter for free

Your guide to what the 2024 US election means for Washington and the world

The EU is considering hitting US services exports, including Big Tech’s operations, to retaliate against Donald Trump imposing 25 per cent tariffs on the car industry and promising a further round of measures next week.

Brussels has already unveiled extra duties on up to €26bn of US goods after Washington imposed steel and aluminium tariffs. But European officials and diplomats said the scale of action by the Trump administration required it to consider using more powerful trade tools. 

The bloc has wide powers to suspend intellectual property rights and exclude companies from public procurement contracts under its Enforcement Regulation, which was strengthened in 2021 after a trade conflict with the first Trump administration.

“The Americans think that they are the ones with escalation dominance [in the trade war], but we also have the ability to do that,” said one EU diplomat, adding that the aim was ultimately to de-escalate with a comprehensive trade deal.

A fightback could include restrictions on the intellectual property of Big Tech companies. Another example would be banning Elon Musk’s Starlink satellite network from winning government contracts. Italy is already reconsidering whether to acquire the system.

“Services is where the US is vulnerable,” a second diplomat said. Washington ran a €109bn trade surplus with the EU in services in 2023, compared with a €157bn deficit in goods.

EU officials believe that the Trump administration will only be willing to negotiate after the US has erected a tariff wall that would demonstrate it is serious about securing better terms from trading partners that allegedly took advantage of its open market.

The European officials are hopeful of making fast progress on an eventual agreement but acknowledge even this would not remove all additional tariffs imposed by Trump.

“The view is that we have to respond. It is the only way to get a deal,” said a third EU diplomat. “We tried to talk.” 

Since the EU’s exports far outweigh its imports, the bloc would struggle to match US tariffs on goods. Brussels also does not want to halt gas supplies from the US to the continent.

“There are only so many goods imports from the US that the EU can target before that damages the economy too much,” said David Henig, of the European Centre for International Political Economy think-tank. “If you don’t want to target energy, there’s a limit to what can be done on goods. Whereas on services there is greater room for retaliation without so much harm to the economy.”

Some experts say that to inflict even more economic pain on the US, the European Commission would need to use its anti-coercion instrument (ACI), dubbed the “trade bazooka”. 

This tool could restrict the activities of US banks, revoke patents or prevent companies receiving revenues from software updates or streaming. 

“I would advise the European Commission to use the ACI,” said Ignacio García Bercero, a former senior commission official who led negotiations on a US-EU trade deal, the Transatlantic Trade and Investment Partnership, that were concluded without a deal.

Any retaliatory measures taken by the EU would be drawn up by the commission but must be approved by a weighted majority of member states. 

EU countries are still negotiating the goods retaliation list drawn up in response to Trump’s steel and aluminium tariffs; France has pressed for bourbon whiskey to be removed to avoid fallout for its own drinks industry.

The commission has postponed the measures, which also cover jeans, motorcycles and possibly soyabeans, until April 12. They will be discussed with national leaders before a final agreement.

Diplomats and officials said there was scope for more goods tariffs in response to any US “reciprocal” tariffs that will be adopted by the White House next week and are expected by Brussels to be around 20 per cent. Aircraft, chemicals and pharmaceutical products could be hit.