As European Commission President Ursula von der Leyen prepares to deliver her annual State of the Union address, she faces a moment of extraordinary pressure. The European Union is once again caught in the crossfire of US President Donald Trump’s unpredictable trade wars. Despite the handshake deal struck in July, intended to restore stability and predictability, Trump has already escalated threats on social media against Europe, signaling that the transatlantic relationship remains fragile and volatile.

At stake is far more than the terms of trade: Europe’s sovereignty, credibility as a global economic power, and even the durability of its democratic institutions. If Brussels continues to miscalculate, it risks reducing the EU to little more than a bystander in the global economic order.

When von der Leyen and Trump reached their provisional trade agreement in Scotland, European officials hoped that the crisis had been contained. Yet optimism evaporated within days. Trump returned to his familiar playbook of confrontation, threatening new tariffs, restrictions on semiconductor exports, and retaliation against the EU’s $3.5 billion fine against Google for anti-competitive practices.

This cycle of handshake agreements followed by renewed threats is not new. Trump thrives on constant escalation, portraying every negotiation as a zero-sum battle in which he must emerge as the victor. The EU’s failure to anticipate this strategy has left it vulnerable. Instead of projecting strength, it has often delayed decisive measures, inadvertently reinforcing the perception in Washington that Europe can be pressured into concessions.

The EU’s strategic missteps earlier this year exemplify the problem. In April and May, when Trump announced sweeping “Liberation Day” tariffs, markets were rattled and investors panicked. At that moment, Europe had leverage: immediate retaliatory measures could have amplified market pressure and forced Trump to the negotiating table under duress, much as China managed to do.

Instead, the EU opted for patience, postponing its response after Trump announced a 90-day pause. By the summer, however, the calculus had shifted. Markets had stabilized, the US and China had reached a temporary deal, and Europe’s retaliation threat looked hollow. When von der Leyen met Trump in July, the outcome was essentially predetermined: Trump could claim victory, while Europe was left with an asymmetric deal that undermined its credibility.

This failure emboldened Trump further. He now sees the EU not as an equal partner but as a reluctant adversary that will eventually fold. Unless Europe reverses this perception, the cycle will repeat indefinitely.

What makes Trump’s latest threats particularly dangerous is their focus on Europe’s digital sovereignty. The EU has worked for years to design rules-such as the Digital Services Act, Digital Markets Act, and member state digital-services taxes-that curb the monopolistic power of US tech giants. These measures are not merely regulatory; they embody Europe’s determination to preserve democratic accountability in the digital age.

If Brussels yields to Trump’s coercion and waters down these policies, it would signal not only weakness in trade but also a retreat from defending European sovereignty. As former ECB President Mario Draghi recently warned, failing to defend these principles would mean abandoning any claim to geoeconomic power.

The EU is not without tools to respond. The Anti-Coercion Instrument (ACI), adopted in 2023, was designed precisely for scenarios like this. It empowers the Commission to retaliate against economic coercion with measures ranging from tariffs and quotas to suspending intellectual property rights or excluding companies from public procurement. Unlike many EU tools hampered by the unanimity rule, the ACI can be activated by a qualified majority, making it a rare and genuinely federal instrument.

Critics often note that the ACI’s procedures are lengthy. Yet this is also a strength. By launching the process early, the Commission can signal its willingness to escalate while leaving room for de-escalation if negotiations succeed. The very act of activating the mechanism would show that Europe is serious, that it will no longer allow threats to pass unanswered.

By contrast, keeping the ACI locked away out of fear of escalation allows it to “rust into obsolescence.” Trump, and future US administrations, will interpret this restraint as weakness, encouraging more coercion.

Deploying the ACI need not mean a descent into all-out trade war. On the contrary, it could create the conditions for genuine negotiation. If Trump is confronted with the credible prospect of tariffs on over $100 billion of US exports, he may conclude that bluster and one-sided deals will no longer suffice.

Europe should therefore adopt a strategy of conditional deterrence: activate the ACI, prepare retaliatory measures, and make clear that they will be suspended if Washington agrees to balanced negotiations on digital services and trade. This approach preserves the possibility of compromise while ensuring that Europe is not negotiating from a position of weakness.

Von der Leyen’s upcoming State of the Union address is a critical moment to set this course. By articulating a strategy of firmness backed by the ACI, she could rally European public opinion, strengthen confidence in EU institutions, and send a message to global partners that Europe is finally ready to defend its sovereignty.

The alternative-more hesitation, more deference to Trump’s threats-would erode trust at home and abroad. Member states already divided on economic policy may splinter further if Brussels fails to act decisively. Worse still, Europe’s claim to leadership in shaping global digital governance would collapse, leaving the field to Washington and Beijing.

The EU today stands at a crossroads. It can either continue to respond passively to Trump’s coercion, in which case it will lose credibility as a geoeconomic power, or it can demonstrate resolve by activating the Anti-Coercion Instrument.

Von der Leyen must recognize that this is not just about tariffs or trade deficits. It is about whether Europe has the political will to defend its democratic foundations and project power in a multipolar world. By reaching for the ACI now, the EU would show that it has learned from past mistakes-and that it is finally ready to negotiate with Washington as an equal.

If Europe fails this test, the consequences will extend far beyond the transatlantic relationship. The message to the world would be unmistakable: the European Union talks about sovereignty but lacks the courage to defend it.

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Source: Weekly Blitz :: Writings