On February 10, 2025, Donald Trump’s proposal to impose new tariffs on the European Union could lead to unexpected retaliatory measures targeting US tech services. A report from Goldman Sachs suggests that instead of imposing tariffs on goods, the EU might restrict American digital services to counterbalance the trade measures from Washington.
- Trump plans new tariffs on the EU.
- EU may target US tech services instead.
- Trade deficit in services favors EU strategy.
- Anti-Coercion Instrument provides new response options.
- EU cautious about escalating trade tensions.
- Member state approval needed for ACI measures.
The potential for a renewed trade conflict between the US and the EU is rising as Trump plans to implement “reciprocal tariffs.” Goldman Sachs economists predict that the US may increase tariffs on European car exports by 25 percentage points and impose a 10% tariff on various critical imports, including metals and pharmaceuticals. This could affect EU exports worth €190 billion, representing approximately 40% of the EU’s total shipments to the US.
In response, the EU may adopt a strategy similar to its 2018 retaliation against US tariffs on steel and aluminum. At that time, Brussels targeted American products such as bourbon whiskey and motorcycles. However, this time, the EU has the Anti-Coercion Instrument (ACI) at its disposal, allowing it to impose restrictions on US services. The EU currently faces a trade deficit of nearly €150 billion in services with the US, primarily due to the dominance of American tech firms.
Goldman Sachs highlights that targeting the digital economy could be a strategic move for the EU. Services imported from the US include IT services and financial services, with significant revenues being repatriated as royalties through low-tax jurisdictions. Any restrictions on these transactions could considerably impact the services trade balance between the two regions.
As the situation unfolds, Europe is closely monitoring Trump’s actions. If new tariffs are imposed, the EU will need to choose between retaliating directly against American goods or strategically targeting the US tech sector, which has so far been insulated from trade conflicts.
The looming trade tensions highlight the complexities of international trade relations. The EU’s potential focus on US tech services marks a significant shift in strategy, emphasizing the importance of the digital economy in future trade disputes.
