The EU could hit Wall Street where it hurts with its tariff response — the tech giants

The European Union says it is keeping all options open if it fails to negotiate its way out of U.S. President Donald Trump's hefty 20% blanket tariffs — and that could include going after mighty Big Tech.

Ahead of the tariff announcement on Wednesday — which has stunned global markets with its scope and scale — European Commission President Ursula von der Leyen said that in formulating its response, Europe "holds a lot of cards, from trade to technology to the size of our market."

"This strength is also built on our readiness to take firm countermeasures. All instruments are on the table," Von der Leyen said Tuesday, a sentiment she reiterated on Thursday.

As a bloc, the EU is the U.S.'s biggest trading partner across goods, services and investment, and trade between the pair is roughly balanced when accounting for both goods and services.

But in calculating its so-called "retaliatory tariffs," the U.S. administration appears to have controversially looked only at countries' trade deficit in goods with the U.S., deeming this gap a "tariff" on the U.S. — and landing major exporters such as Vietnam and Sri Lanka with duties of more than 40%.

For the EU, that meant a tariff of 20% due to the U.S.' goods deficit of around $235.6 billion. Trump has in recent months taken particular umbrage with the U.S.'s trade relationship with the 27-nation single market, accusing it of treating the world's biggest economy "very badly" and making it "very difficult to bring [U.S.] products into Europe" while selling there.

One area in which the EU is a major market for U.S. business is in services and tech companies, Holger Schmieding, chief economist at Berenberg, said Wednesday.

"Whereas the EU will probably not retaliate significantly now, it will likely threaten to do so if negotiations do not yield a result by mid-year," he said. While the economist's base case is for roughly half of the extra U.S. tariffs on EU imports to be negotiated away by the end of the second quarter, tech companies are an avenue through which the EU "could hit the U.S. hard," Schmieding said.

Such measures could take the form of stricter regulations on Big Tech, or using the bloc's Anti-Coercion Instrument (ACI) to delay issuance of business licenses for U.S. firms, limit access to public contracts, restrict intellectual property rights or outright prohibit investments in the EU, according to Carsten Brzeski, global head of macro for ING Research.

Specific targets could include app stores, cell phones, cloud services and other areas such as where are data stored, he said.

With few domestic tech giants, Europe has huge appetite for the products and services of the likes of Apple, Google, Amazon, Meta, Microsoft, Intel and LinkedIn. Many have regional headquarters in the Irish capital Dublin, originally attracted by its low corporate tax rate — along with big names in the U.S. pharmaceutical and financial services industries.

The EU has already taken steps to crack down on Big Tech. The bloc's Digital Markets Act (DMA), for example, aims to tackle the market power of large so-called "gatekeeper" firms such as Google, Apple, Meta, Amazon and Microsoft.

Last month, the European Commission — which is the executive body of the EU — charged Google parent company Alphabet with breaching the DMA and issued Apple with guidance requiring the iPhone maker to do more to comply with the law. Trump has previously cited the EU's regulatory actions against America's tech giants as a reason to hit the bloc with tariffs. In February, he threatened the bloc with tariffs to tackle "overseas extortion" of U.S. tech firms through digital taxes and fines.

U.S. tech giants will meanwhile now be grappling with the supply chain fallout from Trump's tariff policies, with many relying on components and assembly lines in Asia. Apple shares suffered their worst loss since 2020 on Thursday, down more than 9%, amid a broad tech sell-off.

Dan Ives, global head of technology research at Wedbush Securities, said in a note earlier this week that U.S. tech was facing frozen budgets and Covid-era levels of uncertainty, and may even not issue guidance during first quarter earnings season.

However, ING's Brzeski also noted that enacting countermeasures under the ACI would require approval from 15 of 27 EU members, would take around eight weeks to implement, and could meet other technical obstacles.

He also stressed that going after U.S. digital services would be the "nuclear option" in the EU's trade policy kit.

"Not only because it would be unprecedented but also because it would likely trigger strong U.S. retaliation and would also harm European customers, as the region currently has very little domestic alternatives to U.S. digital services," he told CNBC.

"To some extent the EU targeting US digital services would indeed be the spitting image of what Trump just announced: it would be a measure harming trading partners but at the cost of domestic consumers."

Andrew Kenningham, chief Europe economist at Capital Economics, said in a Friday note that while EU policymakers were likely be considering taxes on services or using the ACI, ultimately he expected the EU's response to be "fairly measured."

"The EU will aim to minimise escalation risks and preserve what remains of the US trade relationship for the longer term. Policymakers are also mindful of negotiations over defense and security," he said.

"So while EU leaders have been quick to criticise the tariffs, they have also made clear that they are open to negotiations."

— CNBC's Ryan Browne contributed to this story.