Executive Summary
The European Union is waging what amounts to an economic war on U.S. industry. The United States – long oblivious to this dynamic – is beginning to wake up.
A new series of European regulations seeks to impose progressive agendas onto dominant American companies across the economy. Europe’s “regulatory imperialism” reflects a moral agenda rather than an economic one.
Facing diminished economic leverage and declining geopolitical power, Brussels is increasingly turning to regulation – self-righteously framed in the language of consumer protection, values, and environmentalism – to exercise power on the world stage as a moral authority. New regulations go beyond controlling what happens in Europe, and instead dictate the global behavior of major companies doing business in the EU. In many cases, business conducted by American companies in the United States falls under cumbersome new EU regulations such as the Corporate Sustainability Reporting Directive (CSRD) and the Corporate Sustainability Due Diligence Directive (CS3D). This new pattern, amounting to “regulatory imperialism,” poses new challenges for U.S. sovereignty and threatens to impose significant compliance costs on American companies.
As of July 2025, the only official estimate of compliance costs for CS3D from the EU neglected to include transition costs. This estimate, put out by the European Commission, gave the impression that the compliance burden for in-scope companies would be less than $1 million annually. Self-reported estimates by C-suite leaders suggest much higher transition and annual compliance costs. In the absence of an accurate estimate, U.S. policy makers have overlooked the outrageous costs CS3D imposes on U.S. industry. The federal government has a crucial role to play in measuring the potential impact on U.S. industry and consumers, protecting the United States from this extraterritorial tax, and ensuring that no such threats can emerge in the future.
The EU’s increasingly aggressive regulations seek to reshape American industry and are exacerbating longstanding points of friction in the transatlantic relationship, including NATO members failing to meet defense commitments, as well as traditional protectionist policies such as tariffs, taxes, quotas, and local subsidies. The Trump Administration has taken notice of the EU’s regulatory imperialism. In July’s US-EU trade negotiations, the EU made commitments to the U.S. on reducing the burdens of CS3D and CSRD. Many of these commitments appear primarily theatrical in nature, however, referring to simplifications already under debate in the EU due to internal pushback. Congress also has shown significant interest. The end of 2025 into 2026 will be a critical period for Congress and the Trump Administration to translate momentum into enduring solutions that protect Americans from Europe’s regulatory imperialism.
