Introduction
The European Union (EU) has deployed a competitive strategy with the United States that risks rupturing the transatlantic relationship. Brussels’ campaign of regulatory imperialism targeting American companies reflects Europe’s deteriorating economic conditions, stagnating innovation, and declining demographics.
The effort to counter U.S. ascendency within the West by imposing compliance costs estimated in the hundreds of billions of dollars undermines indispensable support for the EU among American business leaders, who have tempered nationalist trade and industrial policies.1 An uncharacteristically blunt letter from representatives of the U.S. business community to the Trump administration late last year highlights this trend: “The U.S. should not permit the EU to export its own self-imposed regulatory burdens to help shore up its own competitiveness. We should be a model for other nations’ systems, not a target.”2
Rising C-suite resentment toward Brussels resembles the dynamic that foreshadowed – and arguably precipitated – the unraveling of political support for the “win-win” concept of U.S.-China “constructive engagement.” Public discontent among U.S. CEOs exasperated by Beijing’s anti-competitive conduct signaled the beginning of the end of enthusiasm for the Sino-American economic relationship. If the EU persists, the backlash against aggressively anti-American EU regulation – most notably the Corporate Sustainability Due Diligence Directive (CS3D) – threatens to produce different but no less serious consequences.
Overview
- The EU practices “regulatory imperialism” – using onerous edicts to hobble foreign competitors – to compensate for both the Continent’s overall economic decline and inability to implement pro-growth remedies. This strategy naturally emanates from Western Europe’s historical civilizing mission and overseas empires.
- The EU’s aggression against foreign firms has produced a marked deterioration in pro-Europe sentiment among American business leaders, with just 21 percent reporting optimism about the transatlantic relationship in a September 2025 survey.3 This resembles the decline in corporate optimism regarding China that preceded the decline of the pro-China political coalition that undergirded Clinton-Bush era support for U.S.-China economic integration.
- The EU’s punitive response to U.S. economic success reflects not simply Europe’s economic stagnation, but also its assessment that America’s lead likely will expand in the coming decade. This means that even seemingly significant increases in Europe’s spending on key initiatives – for example, defense and R&D – measured as a percentage of GDP will apply to a relatively shrinking economy. This growing gap renders the probability of returning Europe to a truly competitive position ever more remote.
- Baron’s conversations with Central European political leaders reveal deep anxiety about the EU’s future as a supranational political project. Although unlikely to disintegrate, the EU confronts the prospect of decline and fracture as member states seek to reclaim power from Brussels through pursuing “multi-vector” foreign policy and forging intra-continental sub-alliances.
- The EU must be distinguished from Europe, which also differs from the constituent nation states that hold the spectrum of views on Brussels. Individual countries seem increasingly inclined toward a layered approach composed of: retaining the economic and fiscal advantages of EU membership; employing the balancing force of strong relations with an external power (to date, overwhelmingly the United States); and opportunistically building coalitions of states within Europe to advance key priorities.
Regulatory Imperialism
The EU’s declining economic output relative to the United States has led Brussels to choose a negative competitive strategy: regulatory imperialism. Brussels seeks an improved position not through strengthening innovation and incentivizing capital expenditures, but rather a receding tide that lowers all boats. EU officials justify this de facto “race to the bottom” through de jure mechanisms that channel Europe’s self-conceived centuries-old role as exporter of civilization. In the post-War era, Christianity has been replaced by climate, labor, human rights, and other secularized moral imperatives. In this way, Europe’s sense of its relationship with her former colonies has not changed. As EU internal market commissioner Thierry Breton lectured Meta CEO Mark Zuckerberg, “If you understand extremely well the set of our values on which we are building our continent, year after year, you understand how you need to behave.” Breton demanded moral compliance, to distinctly European values.4
The paramount example of regulatory imperialism: the Corporate Sustainability Due Diligence Directive (CS3D), which imposes compliance requirements on non-European corporations that earn above a revenue threshold of €1.5 billion in annual turnover within the EU. One-time compliance costs for U.S. firms could exceed $1 trillion, according to a recent study commissioned by Baron.5
CS3D supersedes national sovereignty, empowering Brussels to impose fines on in-scope companies for infractions entirely outside the EU. Furthermore, even American firms which do not conduct business in the EU will be affected by CS3D if they fall within the supply chain of an in-scope U.S. company.
American subsidization of European healthcare represents another front in the battle over the EU’s regulatory imperialism. The Trump Administration’s May 2025 executive order on most-favored-nation drug pricing (MFN pricing) opens by noting, “The United States has less than five percent of the world’s population and yet funds around three quarters of global pharmaceutical profits.”6 European and other governments leverage national power to secure preferential pricing from U.S. pharmaceutical companies, capturing the benefits of U.S. innovation without corresponding investments in drug development. MFN pricing aims to correct this disparity by pegging U.S. drug costs to the lowest costs charged in other developed nations.
Brussels has responded with a tepid “Pharma Package” law to boost domestic production and lower costs. For example, the law would lessen patent protections for new drugs from a decade to nine years.7
Meanwhile, the EU signed a massive trade deal with India, one of the world’s leading producers of generic drugs. Generics poorly substitute, however, for the cutting-edge drugs the EU imports from the United States. When Pfizer CEO Albert Bourla – a native of Thessaloniki, Greece – was asked in January 2026 about MFN pricing, he replied: “Shall we reduce the US price to France’s level, or stop supplying France? We stop supplying France.”8
Opposition From U.S. Business Leaders
The EU’s regulatory imperialism has alienated American multinationals. Even as many corporate statements on the topic include the old notes of cooperation and partnership, the criticism increasingly has been stinging. The U.S. Chamber of Commerce assailed the EU’s fines against U.S. tech companies as “arbitrary and abusive,” accusing the EU of “deliberately us[ing] fines to transfer wealth from American companies, their workers, and shareholders to European coffers.”9
At a 2025 conference in Ireland, JPMorgan Chase CEO Jamie Dimon told Europeans flatly: “You’re losing.”10 Peter Huntsman, CEO of chemicals manufacturer Huntsman Corp, argued that the EU’s problems go beyond bureaucracy: “I just don’t see that there’s any seriousness. There are no bold ideas coming out of Europe right now.”11 And ExxonMobil CEO Darren Woods declared CS3D a “bone-crushing burden,” saying by “slowly suffocating itself,” Europe is “only going to accelerate our exit” from the continent.12
Such comments reflect business sentiment captured by survey data. In the American Chamber of Commerce to the European Union’s September 2025 survey of U.S. business sentiment, a majority of participants (56 percent) expected EU policies to have a negative effect on their European operations over the coming years, with CS3D named as one of the top three concerns. This figure rose from the previous January survey, even as American businesses’ perception of the risk coming from the Trump administration declined. Fully 46 percent of respondents indicated that they are pessimistic about the relationship; just 21 percent reported optimism.13
The China Precedent
In 2015, Uber was spending hugely, and initially successfully, on building a business in China. Although losing more than $1 billion a year in China at the time, Uber appeared poised to secure a substantial and durable market share in the country.14 Riders, drivers, and regulators sang Uber’s praises; press coverage lauded Travis Kalanick as a U.S. CEO who could navigate Beijing.15 Even as early signs of problems emerged, Kalanick publicly minimized the challenges: “Competition in China just works different…as a Western company, these are the kinds of things you just have to get used to. We play by different rules, but that’s okay.”16
Just months later, Uber sold its Chinese subsidiary to main local rival Didi and unceremoniously exited the country. The stated cause was competition from Didi; subsequent analysis suggested that onerous,
targeted regulation from Beijing was the key factor.17 Uber’s failure in 2015 represented the culmination of a deterioration in market conditions identified years earlier.
In 2010, U.S. Chamber of Commerce President Tom Donohue protested to Chinese officials that frustration with China among U.S. business leaders was the worst he had ever witnessed.18 That same year, General Electric CEO Jeff Immelt – a titan of America’s industrial CEOs and a leader of an iconic company that had championed close ties with Beijing – complained, “I am not sure that in the end, [China] want[s] any of us to win, or any of us to be successful.”19
Donald J. Trump had objected to China’s anticompetitive practices for many years prior to his 2016 presidential candidacy. As early as 2000, then-businessman Trump declared in The America We Deserve that “China is flooding American markets with cheap goods produced by forced labor, and pouring $80 billion a year into a world-class military machine that includes nuclear missiles aimed at America. Sure we can trust them.”20 His later electoral success followed the collective decision of America’s corporate leadership to abandon hope in China as a vast, new market. The tariffs that ultimately would rank among President Trump’s most significant domestic policy achievements drew only token opposition from an American business leadership embittered by Beijing’s perceived duplicity.
Conclusion
The EU confronts a complex, self-reinforcing, and intensifying crisis. The boldness of EU officials betrays well-justified doubts in Brussels about Europe’s future. This combination signals weakness and invites retaliation, creating a perilous situation for the EU. Absent a devastating war, fiscal crisis, or other calamity, the United States will have the ability and incentive to compel an economic relationship that improves the prospects of America’s leading enterprises in Europe. If the pattern of the U.S. and China applies, the CEOs of the American companies today targeted by the EU will play a decisive role in determining the fate of Brussels.
Endnotes
1 “Joint Trade Letter on EU Corporate Sustainability Due Diligence Directive,” U.S. Chamber of Commerce, October 31, 2025. https://www.uschamber.com/finance/joint-trade-letter-on-eu-corporate-sustainability-due-diligence-directive.
2 “Joint Trade Letter on EU Corporate Sustainability Due Diligence Directive,” U.S. Chamber of Commerce, October 31, 2025. https://www.uschamber.com/finance/joint-trade-letter-on-eu-corporate-sustainability-due-diligence-directive.
3 ”Transatlantic Business Outlook Following the EU-US Framework Agreement,” AmCham EU, September 25, 2025. https://www.amchameu.eu/position-papers/survey-eu-us-deal-calms-business-outlook-companies-urge-policymakers-to-press-ahead.
4 Natasha Lomas, “Europe to Facebook: Pay Taxes and Respect Our Values – Or We’ll Regulate.” TechCrunch, May 19, 2020. https://techcrunch.com/2020/05/19/europe-to-facebook-pay-taxes-and-respect-our-values-or-well-regulate/.
5 Harold Furchtgott-Roth, “The EU’s December 2025 Changes to CS3D: Quantifying Costs to US Industry,” Hudson Institute, February 2, 2026. https://www.hudson.org/economics/eus-december-2025-changes-cs3d-quantifying-costs-us-industry-harold-furchtgott-roth
6 “Delivering Most-Favored-Nation Prescription Drug Pricing to American Patients,” May 12, 2025. https://www.whitehouse.gov/presidential-actions/2025/05/delivering-most-favored-nation-prescription-drug-pricing-to-american-patients.
7 Frankie Fattorini, “Europe’s Pharma Trade with the US Remains Critical Despite Tariff Turmoil,” Pharmaceutical Technology, March 3, 2025. https://www.pharmaceutical-technology.com/features/europes-pharma-trade-with-the-us-remains-critical-despite-tariff-turmoil.
8 Michael Erman, “Pfizer CEO Plans for Soaring Consumer Market for Obesity Drugs Akin to Viagra,” Reuters, January 12, 2026. https://www.reuters.com/business/healthcare-pharmaceuticals/pfizer-ceo-plans-soaring-consumer-market-obesity-drugs-akin-viagra-2026-01-12/.
9 “Arbitrary and Abusive: The Discriminatory Impact of European Fines on American Companies,” U.S. Chamber of Commerce, June 5, 2025. https://www.uschamber.com/regulations/impact-of-european-fines-on-american-companies-report.
10 Louis Goss. “JP Morgan Chief’s Message to Europe: ‘You’re Losing,’” The Telegraph, July 10, 2025. https://www.telegraph.co.uk/business/2025/07/10/jp-morgan-chiefs-message-to-europe-youre-losing.
11 Kim Mackrael, “Trump and U.S. CEOs Agree: European Red Tape Goes Too Far,” The Wall Street Journal, December 9, 2025. https://www.wsj.com/world/europe/trump-and-u-s-ceos-agree-european-red-tape-goes-too-far-cdede011.
12 “A Bone-Crushing Burden: Darren Woods Discusses CSDDD,” ExxonMobil, October 2, 2025. https://corporate.exxonmobil.com/locations/european-region/european-newsroom/2025/a-bone-crushing-burden-darren-woods-discusses-csddd#DarrenWoodsdiscussesCSDDD.
13 “Transatlantic Business Outlook Following the EU-US Framework Agreement,” AmCham EU, September 25, 2025. https://www.amchameu.eu/position-papers/survey-eu-us-deal-calms-business-outlook-companies-urge-policymakers-to-press-ahead.
14 “Uber Losing $1 Billion a Year to Compete in China,” Reuters, February 18, 2016. https://www.reuters.com/article/world/uber-losing-1-billion-a-year-to-compete-in-china.
15 Paul Mozur and Mike Isaac, “Uber Spends Heavily to Establish Itself in China,” The New York Times, June 8, 2015. https://www.nytimes.com/2015/06/09/technology/uber-spends-heavily-to-establish-itself-in-china.html.
16 Rebecca Blumenstein, “Uber CEO on Difficulties of Competing in China,” The Wall Street Journal, October 21, 2015. https://www.wsj.com/video/uber-ceo-on-difficulties-of-competing-in-china.
17 William C. Kirby, “The Real Reason Uber Is Giving Up in China,” Harvard Business Review, August 2, 2016. https://hbr.org/2016/08/the-real-reason-uber-is-giving-up-in-china.
18 Mark Drajem, “Donohue Says U.S. Business Frustration with China Worst in Decade,” Bloomberg, May 23, 2010. https://www.bloomberg.com/news/articles/2010-05-24/chamber-s-donohue-says-u-s-business-frustration-in-china-worst-in-decade.
19 Andrew Browne, “Immelt on China: They Won’t Let Us Win,” The Wall Street Journal, July 2, 2010. https://www.wsj.com/articles/BL-CJB-9419.
20 Donald Trump, The America We Deserve (Renaissance Books: 2000), p. 160.
