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Shkruar nga Andy Bounds & Amy Kazmin
The EU must be prepared to use the "trade bazooka"!
Italian Prime Minister Giorgia Meloni is under pressure from Italy's EU partners to "pick a side" in the transatlantic trade war, as she has an effective veto, like several major member states, on Brussels' ability to react harshly against US tariffs.
Meloni, who has friendly ties with US President Donald Trump, is opposing a Franco-German push to escalate the EU's response to the so-called 20 percent "reciprocal tariff" that will be imposed on its exports.
Paris and Berlin are among the member states urging the European Commission to crack down on US exports of services such as technology in response to Trump's measures affecting more than 360 billion euros of its trade.
At a meeting of ambassadors on Thursday, France, Germany, Spain and Belgium said the EU should be prepared to use its "trade bazooka," the anti-coercion instrument, for the first time ever to achieve this, two EU diplomats said.
But a move using the instrument could be blocked by a weighted minority of member states. Given Italy's size, it would be the decisive member of the "NO" camp, which also includes Romania, Greece and Hungary.
"At some point she will have to choose a side. There is a lot of talk about services as the next step ," said one of the diplomats.
Meloni told the FT last week that it was “childish” to suggest she had to choose between the US and Europe, insisting she would defend Italy’s interests. Meloni has criticised Trump’s tariffs on the EU this week as “a wrong decision”. But she has called for calm and honest negotiations, warning that escalation risks further damage to European economies.
A vocal Eurosceptic in the opposition, Meloni has "played ball" in Brussels since coming to power two years ago, said the second diplomat, who cited her "vulnerability to markets given Italy's debt and deficit levels" as a possible reason she "stayed within the group."
However, they said, if negotiations do not progress over the next few weeks, Meloni will be asked to support retaliation against the US.
" It's all about protecting Italy. We all do this from time to time. But we all need to hold out a little to maximize the pressure on the US. Trade is the first big test ," they said.
Meloni's concern about a trade war reflects opinion among business groups in Italy, which still sees the US as an ally and friend, as well as the country's second-largest export market.
" In this case, there is a single country that is harming itself on a massive scale. What do you do if a friend is harming itself, and is provoking you into harm? You tell him, 'don't do this'... But let's stay calm. Don't start wars ," said Marco Simoni, who was an economic advisor to two former center-left Italian prime ministers.
Simon argued that the devastating effects of tariffs on the US economy, including business bankruptcies and job losses, would lead to strong domestic pressure for a rollback.
" Wait six months. The US will be in open recession and American companies will be begging the government to lift the tariffs ," said Simoni, who teaches at Rome's Luiss University.
"If countries retaliate, we are giving a huge advantage to Trump, when the recession hits America, he will tell the electorate that we are in recession because of the retaliation," he added.
The anti-coercion instrument allows for retaliatory measures, such as revoking intellectual property rights protection or their commercial exploitation through, for example, software downloads and streaming services. Brussels can also block foreign direct investment or restrict market access for banking, insurance and other financial services groups.
Ireland has publicly opposed the use of the ACI - which was agreed in 2023 - ahead of a meeting of EU trade ministers in Luxembourg on Monday.
Meloni's office and other ministries declined to comment on Rome's view on using the instrument. But on Thursday, Meloni also said the EU must respond to the challenge by promoting deeper integration of the European economy and cutting regulatory burdens.
Even before this week's global tariff announcement, Trump had imposed sectoral taxes of 25 percent on steel, aluminum and cars.
The European Commission has said it will retaliate against steel tariffs on up to €26 million of US exports. Ireland, France and Italy have asked for bourbon whiskey to be removed from the list of products to be targeted.
The Commission will send its final list of retaliation measures, which is separate from any use of the anti-coercion instrument, to member states on Monday, with a vote expected on April 9. If approved, they will become law on April 15 and apply from May 15.
European Commission President Ursula von der Leyen said after Trump's announcement that the EU was preparing further retaliation, but it was "ready to negotiate to remove any remaining barriers to transatlantic trade." However, Commission officials said the EU would not do so unilaterally.
Karl Falkenberg, a former senior EU trade official and now an adviser at consultancy Shearwater, said the bloc would need to hit US services exports to create leverage. / Adapted from “Pamphlet” by “Financial Times”
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