The Cloud Crossfire How EU's Anti-Coercion Instrument Could Impact AWS-Dependent European Startups
As a European startup founder, you’re probably more focused on product roadmaps and scaling users than international trade disputes. But recent rumblings of a global trade war might change that.
The New Tariff Reality and Europe's Response
The news hit yesterday - U.S. president announced a 10% baseline tariff on global imports with an unjustified, illegal and disproportionate 20% tariffs specifically targeting EU goods. The EU isn't standing idle. European Commission President Ursula von der Leyen has made it clear: "Europe did not start this confrontation... but we have a strong plan to strike back if necessary." That "strong plan" centers around the EU's Anti-Coercion Instrument (ACI)– described as a trade war bazooka – could be invoked to strike back at the US by targeting services and tech companies rather than just goods. In plain terms: the EU is willing to hit American tech giants if that’s what it takes to defend its interests in a trade standoff. Why target US tech giants like AWS?
- High Impact: They are deeply embedded in the European economy.
- Strategic Importance: Cloud infrastructure is foundational for digital sovereignty, a key EU priority.
- Visibility: It sends a strong political message.
Here is the problem for EU business and tech leaders: European cloud infrastructure currently has a heavy footprint of U.S. providers like Amazon – an estimated 92% of Europe’s cloud infrastructure is run by U.S. companies. This dominance raises sovereignty concerns if geopolitical tensions escalate. European SaaS platforms, e-commerce startups, and online marketplaces often run their entire backend on Amazon Web Services (AWS). It’s convenient and cost-effective – until it isn’t. If the EU-US spat escalates and AWS becomes a target of EU retaliation, startups could find themselves caught in the crossfire.
How Could ACI Affect AWS and it's European customers?
- Tariffs or Taxes on Cloud Services: Analysts speculate that a 10–20% tariff on U.S. tech services could significantly inflate subscription costs for cloud platforms. Imagine your AWS bill jumping by that margin overnight, in fact, analysis by McKinsey estimated that a 15% jump in U.S. cloud service costs could cut EU SMEs’ profits by about 8% on average.
- Public Sector Lock-Outs - AWS has received over €1.3 billion in European public contracts from only in 2019–2021 so if it looses this revenue stream this might lead to price increases for private customers and reduction in investment into EU infra.
- Regulatory and Market Access Restrictions - new regulations could come in effect that only apply to non-EU cloud providers – for example, stricter compliance hoops, local ownership requirements, or even temporary service prohibitions if AWS doesn’t meet certain criteria. While an outright ban on AWS is extremely unlikely constraints on new data center investments or cloud offerings are conceivable.
- Data Sovereignty Pressures - EU regulators are increasingly concerned that sensitive European data stored on U.S.-owned clouds could be accessed by the U.S. government (thanks to laws like the CLOUD Act). In a hostile trade war climate, those fears amplify. Amazon’s deep entanglement with the US national security apparatus raises grave concerns about the protection of European data therefore allowing AWS to host critical EU data during adversarial times is a risk.
Ripple Effects on Startups Relying on AWS
Beyond the increasing costs and your cloud bill killing your bottom line, there are other things to consider. Lets assume that there is not only trade escalation down the road but regulatory restrictions and even an escalation in geopolitical context (think Greenland). U.S. authorities or AWS itself could even retaliate by prioritizing American customers over European ones (far-fetched, but not impossible if politics get ugly). One industry expert warned that since roughly 92% of European companies rely on U.S.-based cloud providers, they are susceptible to outages or service denials that are beyond their control. We saw hints of this vulnerability when a U.S. cloud-related sanction or export control (against another country) inadvertently affected some European users. In the same scenario your business that relies on the U.S. provider might be exposed to all sorts of legal and compliance complexities. might force time-consuming compliance work on your end – e.g. proving your AWS instances are in EU regions, or perhaps migrating part of your stack to an EU-owned provider to meet contracts or regulations. Legal teams will have more to chew on, and startups may need to get legal advice on cloud arrangements, which is something many haven’t had to deeply consider before. If your product is built tightly around AWS-specific services, you might face strategic questions: should we refactor to be cloud-agnostic? Should we avoid using that cool new AWS feature because we’re not sure if it’ll fall under new EU scrutiny? Over-reliance on any single tech supplier has always been a risk (the classic “vendor lock-in” problem), but now you can add geopolitical risk to the list of reasons to be cautious. Europe’s tech community is already talking about reducing dependence on U.S. tech in light of these tensions. As a forward-looking leader, you’ll want to keep an eye on that narrative so you’re not caught off guard if preferences shift.
Conclusion
I think i well argued that in case of ACI and of EU countermeasures, AWS could be hit with higher operating costs, new limitations, or a gradual chipping away of its European market share as a result. None of these scenarios is an immediate deathblow to AWS’s presence – Amazon is likely to negotiate, comply where it can, and try everything to preserve its EU customer base, they are not "too big to care" but exactly the opposite. But even it the best case scenario that it's business as usual down the road, ask yourself a strategic question, as a business leader making a decision today would i really invest in building something on AWS?
None of these effects mean you must ditch AWS tomorrow. But they do mean it’s time to draw up a contingency plan. Let’s move from problems to solutions: what can you actually do to prepare and mitigate these risks? More on that in the next post.
