US demands EU water down supply chain laws under trade deal terms

The United States has turned up the pressure on the European Union to ease corporate sustainability laws that Washington regards as non-tariff trade barriers, invoking commitments Brussels made during negotiations with President Donald Trump in Scotland just over a year ago.

A public demand from Washington

Andrew Puzder, the US Ambassador to the EU, used a post on X on Friday to call on the 27-nation bloc to honour pledges made at Turnberry, Scotland, in July 2025. The Turnberry talks between Trump and European Commission officials produced a set of commitments on non-tariff barriers, the regulatory measures that can restrict trade just as effectively as customs duties even though they take a different form. Puzder's intervention was unusually direct: an American ambassador publicly telling the EU to follow through on a deal it signed.

At the heart of the dispute are EU laws that place responsibility on large companies for the environmental and social impact of their global supply chains. Washington has long argued that these rules amount to a disguised trade barrier, imposing compliance costs and legal risks on American firms that export to or operate within the bloc.

What non-tariff barriers really mean

Tariffs are the most visible form of trade restriction, but they are far from the only one. Non-tariff barriers encompass a broad range of measures: product standards, certification requirements, labelling rules, data localisation mandates, and, in this case, corporate due diligence obligations. The World Trade Organization has long recognised that such measures can distort trade, but distinguishing between legitimate public policy and protectionism is contentious. The EU maintains that its supply chain laws are about protecting human rights and the environment. The US sees them as an indirect way of favouring European companies that are already familiar with the regulatory landscape, while raising costs for foreign competitors.

The disagreement is not new. Transatlantic trade talks have circled around non-tariff barriers for decades. The failed Transatlantic Trade and Investment Partnership negotiations under the Obama administration foundered partly on European resistance to accepting US regulatory standards on food safety, chemicals and data privacy. What has changed is the political temperature. Trump's return to the White House brought a more combative stance, and the Turnberry talks were framed by Washington as an opportunity for the EU to demonstrate goodwill on regulatory alignment.

The supply chain laws in question

The primary target of American frustration is the Corporate Sustainability Due Diligence Directive, known as CSDDD, which the EU adopted in 2024. The directive requires large companies operating in the EU to identify, prevent and mitigate adverse human rights and environmental impacts in their supply chains. It applies not only to a company's own operations but also to those of its subsidiaries and business partners throughout the value chain.

Implementation has been gradual. Member states had until mid-2026 to transpose the directive into national law, with the largest companies facing compliance obligations from 2027 onwards. The European Commission has said the rules would apply to companies with more than 1,000 employees and a worldwide turnover above 450 million euro, thresholds that capture a significant share of transatlantic trade. The directive's text on EUR-Lex makes clear that companies can face civil liability for failures in their supply chain due diligence, a provision that has alarmed American business groups.

For US firms, the practical concern is straightforward. An American manufacturer selling into the European market may now need to audit its entire supply chain, including subcontractors in Southeast Asia or raw material providers in Africa, to ensure compliance with EU-defined environmental and social standards. The cost of compliance is real. The legal risk of non-compliance is greater. And the competitive advantage enjoyed by European firms that have been preparing for these rules for years is not incidental.

The Turnberry commitments

The July 2025 talks at Turnberry produced joint statements in which both sides pledged to address non-tariff barriers that impede transatlantic trade. The language, as is typical in such agreements, was general. The EU acknowledged that its regulatory measures should not constitute unnecessary obstacles to commerce. The US acknowledged the right of the EU to pursue legitimate public policy objectives. The gap between those two positions is where the current dispute lives.

Sources familiar with the negotiations say that the commitments were deliberately ambiguous, a diplomatic necessity when two parties hold fundamentally different views on the boundary between regulation and protectionism. Washington interprets the Turnberry text as a promise by Brussels to modify or soften supply chain rules that burden American exporters. Brussels reads the same text as an acknowledgement that existing rules should be implemented in a non-discriminatory manner, not as a pledge to rewrite them.

Brussels signals no further concessions

EU officials, speaking on condition of anonymity, have made clear that no further concessions on environmental regulation are planned. The Commission has already made adjustments to the CSDDD's implementing guidelines, narrowing the scope of what companies must assess and providing transition periods that ease the immediate compliance burden. Those adjustments were presented as pragmatic clarifications, not as concessions to American pressure, though the timing suggested otherwise.

The political calculus in Brussels is complicated. The Commission faces pressure from two directions. On one side, the US administration is threatening further trade action if non-tariff barriers are not addressed. On the other, Green and Social Democratic members of the European Parliament, along with civil society organisations, are watching closely for any sign that environmental protections are being traded away for commercial convenience. The European Parliament has been a vigorous defender of the CSDDD and would resist any attempt to dilute it through executive action.

There is also an institutional question. The Commission can issue guidance and delay enforcement, but substantive changes to the directive would require a legislative proposal and approval by the Parliament and Council. That process takes months, if not years, and there is no guarantee that member states would agree. Countries such as France and the Netherlands, which have their own domestic due diligence laws, have little appetite for weakening EU-wide rules.

The business lobby splits

European business groups are themselves divided. Some large companies, particularly those that have already invested in supply chain compliance systems, see the CSDDD as a source of competitive advantage over rivals that face higher compliance costs. Others, especially small and medium-sized enterprises that sit in the supply chains of larger firms, worry about the cascading obligations and the legal exposure they create.

American industry groups have been more united in their criticism. The US Chamber of Commerce and the National Association of Manufacturers have both argued that the CSDDD effectively exports European regulatory preferences to the rest of the world, forcing companies in third countries to comply with EU standards if they want access to the single market. That argument has gained traction in Washington, where the administration has framed it as a question of sovereignty as much as commerce.

What autumn will bring

Sources on both sides say that joint statements on non-tariff barriers are expected in autumn 2026. Those statements are likely to restate existing positions rather than break new ground. The EU will emphasise its commitment to non-discriminatory implementation. The US will reiterate its view that the rules themselves are the problem, not merely the manner of their enforcement.

The risk is that the dispute escalates beyond statements. Trump has shown a willingness to use tariffs as leverage in trade negotiations, and the administration has already imposed duties on European steel and aluminium. If Washington decides that the EU is not moving fast enough on non-tariff barriers, further tariff action cannot be ruled out. The EU, for its part, has its own schedule of retaliatory measures that could be activated.