European governments are weighing an aggressive trade response to President Donald Trump’s warnings of sweeping tariffs if an agreement is not reached to transfer Greenland to the United States, but Treasury Secretary Scott Bessent cautioned Tuesday that such a move would be a serious mistake. Speaking in Davos, Bessent said it would be “unwise” for Europe to answer Washington with retaliatory measures.
According to a report by CNBC, France urged the European Union during an emergency meeting in Brussels on Sunday to consider activating the bloc’s so-called Anti-Coercion Instrument, a powerful mechanism described by officials as a trade “bazooka” intended to deter economic pressure from abroad.
The Anti-Coercion Instrument was created to counter what the EU defines as economic coercion—actions designed to force policy changes that could disrupt trade or investment flows.
Possible countermeasures under the instrument could extend beyond tariffs to include steps involving “trade-related aspects of intellectual property rights” and restrictions on public procurement, in addition to actions in financial and trade markets—an array of options European officials have characterized as a nuclear option.
Bessent, attending the World Economic Forum, warned that deploying such tools in response to Trump’s tariff threats would be “very unwise,” adding that “everybody should take the president at his word.”
Rather than retaliating immediately, Bessent said governments and businesses should “let things play out” following Trump’s tariff warnings, according to remarks reported Tuesday by The Guardian.
He pointed to last year’s trade clash between the United States and China, noting that Trump’s “liberation day” tariff announcement initially sent shockwaves through global markets before several companies ultimately reached trade agreements.
By late 2025, markets had rebounded to record levels, a recovery driven in part by rapid growth in artificial intelligence.
“The worst thing countries can do is escalate against the United States,” Bessent said.
Within Europe, there is no unified stance on using the Anti-Coercion Instrument. Germany, whose economy relies heavily on exports, is among the countries opposed to triggering it, according to Carsten Nickel, deputy director of research at Teneo, who spoke to CNBC.
Industries seen as most vulnerable to Trump’s proposed tariffs include automakers such as BMW in Germany and Stellantis in Milan, along with major pharmaceutical companies including Novo Nordisk and Roche in Switzerland.
Despite internal divisions, Germany and France on Monday urged the EU to deliver a “clear” response to Trump’s threats, The Financial Times reported.
“We will not be blackmailed,” German Finance Minister Lars Klingbeil said.
Three EU officials familiar with the discussions said European Commission staff have drafted retaliation scenarios but are refraining from deploying the Anti-Coercion Instrument for now, hoping diplomacy during this week’s meetings with Trump in Davos will yield progress.
“Our number one priority now is to really engage and cooperate and have a good dialogue with U.S. counterparts,” European Commission Vice President Henna Virkkunen told the Financial Times.
“At the same time, we have also tools at our disposal here. We have prepared also for that,” Virkkunen said.
Virkkunen added that the Anti-Coercion Instrument could also be used to restrict American technology companies’ access to the EU’s internal market, emphasizing that Europe represents the largest market for several major tech firms.
European leaders are also seeking to convince Trump that they are prepared to shoulder more responsibility for Arctic security, pointing to proposals by Denmark and Greenland for a NATO mission on the island similar to existing efforts to protect critical infrastructure in the Baltic Sea from Russian and Chinese threats.
U.K. Prime Minister Keir Starmer said he would deploy the “full strength of government at home and abroad” to uphold international law, describing Trump’s tariff threats as “completely wrong.”
Financial markets have reacted sharply to the escalating rhetoric. Futures linked to the Dow Jones Industrial Average were expected to open Tuesday down 378 points.
European equities fell broadly on Monday, while investors sought safety in gold and silver, which climbed to new highs just days after surpassing previous records.
The exchange of threats has unfolded alongside heightened security activity in the Arctic. Denmark confirmed Monday that it had dispatched additional troops to Greenland, as Trump again declined to rule out the use of military force to assert control over the island.
Danish officials said a “substantial contribution” of soldiers, along with the head of the country’s army, had been sent to Greenland, including deployments to the capital, Nuuk, and to Kangerlussuaq.
{Matzav.com}