What the EU’s ‘trade bazooka’ is and how it works

In a dramatic shift toward a more assertive trade stance, the European Union has armed itself with what many analysts are calling a “trade bazooka” – a powerful economic weapon designed to counter coercive practices from global trading partners, particularly China.

The new anti-coercion instrument, which came into full effect last month, represents Brussels’ most aggressive trade defense tool to date. It allows the EU to impose countermeasures, including tariffs and investment restrictions, against countries that attempt to pressure EU member states into changing their policies through economic intimidation.

“This instrument fills a critical gap in our defense arsenal,” said Valdis Dombrovskis, the EU’s trade commissioner, during a press briefing in Brussels. “For too long, the EU has been vulnerable to economic strong-arming from certain trade partners. Now we have the means to respond decisively.”

The tool emerged largely in response to China’s treatment of Lithuania, which faced severe trade restrictions from Beijing after allowing Taiwan to open a representative office in Vilnius in 2021. When Lithuania defied China’s “One China” policy by permitting the office to use the name “Taiwan” rather than “Taipei,” China blocked Lithuanian imports and pressured multinational companies to sever ties with Lithuanian suppliers.

The EU’s previous inability to mount an effective response highlighted its vulnerability to such tactics. With the new instrument, officials in Brussels can now move quickly to counteract similar pressure campaigns without having to navigate World Trade Organization processes, which can take years.

Under the new rules, the European Commission can investigate suspected cases of economic coercion and impose countermeasures within months. These can range from tariffs on goods and services to restrictions on foreign investments, limitations on intellectual property protections, and even exclusion from EU public procurement markets.

“This isn’t about protectionism,” emphasized Sophie Dirven, a senior trade policy analyst at the European Policy Centre. “It’s about creating consequences for countries that attempt to use economic leverage as a political weapon. The EU remains committed to open, rules-based trade.”

Industry reactions have been largely positive. BusinessEurope, the continent’s largest business lobby group, has welcomed the tool as necessary protection in an increasingly complex global trade environment.

“European businesses need certainty that they won’t be caught in the crossfire of geopolitical disputes,” said Fredrik Persson, president of BusinessEurope. “This instrument provides that assurance while preserving our commitment to open markets.”

The timing of the instrument’s implementation is significant, coming amid escalating tensions between China and various Western nations. In addition to the Lithuanian dispute, China has recently targeted European goods ranging from French cognac to German automobiles in what many view as politically motivated trade actions.

The EU is not alone in developing such defensive tools. The United States has its Section 301 provision, which allows Washington to unilaterally impose tariffs against unfair trade practices. Japan and the UK are reportedly considering similar mechanisms.

Critics, however, warn that the EU’s new weapon could contribute to further fragmentation of global trade. The Chinese Mission to the EU issued a statement expressing “serious concern” about the instrument, calling it “a unilateral measure inconsistent with WTO rules.”

Some trade experts also caution about potential overreach. “There’s always a risk that such powerful tools could be misused for protectionist purposes,” noted Hosuk Lee-Makiyama, director of the European Centre for International Political Economy. “The EU must be careful to deploy this instrument only in genuine cases of coercion.”

The effectiveness of the trade bazooka will likely be tested soon. With EU-China relations already strained over issues ranging from human rights to market access, and the European Commission’s ongoing investigation into Chinese electric vehicle subsidies, many anticipate Beijing may test the EU’s resolve.

For now, EU officials emphasize that the instrument’s primary value may be deterrence. By demonstrating the capacity to respond forcefully to economic coercion, Brussels hopes to prevent such tactics from being employed in the first place.

“In an ideal world, we would never need to use this tool,” said one Commission official, speaking on condition of anonymity. “But in today’s geopolitical climate, having a credible deterrent is essential for protecting European interests and sovereignty.”