The Trump administration sent a letter to the European Union (EU) in August 2026 saying that it "will take any actions necessary to address unreasonable burdens on US commerce" unless the EU further scales back two corporate sustainability laws. The letter identifies the Corporate Sustainability Reporting Directive (CSRD), which requires companies to disclose sustainability-related information, and the Corporate Sustainability Due Diligence Directive (CSDDD), which requires companies to address environmental and human rights risks across their operations and supply chains.
In the letter, the U.S. government cites the U.S.-EU Framework Agreement on Trade, signed in August 2025, and states that under that agreement, the EU committed to "undertake efforts to ensure" that CSDDD and CSRD "do not pose undue restrictions on transatlantic trade."
On Aug. 14, 2026, U.S. Ambassador to the EU Andrew Puzder said in an X post that "Now it's time for the EU to deliver" on the EU's trade commitments.
The Trump administration said in the letter that the EU had made some positive reforms but that those changes "failed to fully address U.S. concerns." The administration made the following requests:
- Limiting CSDDD's application to U.S. companies' EU subsidiaries and business partners;
- Barring penalties calculated using revenue earned outside Europe;
- Restricting private lawsuits to cases where a regulator has first found a violation;
- Designating the U.S. as a low-risk jurisdiction eligible for presumed compliance.
The administration also objected to the EU's double materiality standard, which requires companies to report both financial risks and their own effects on people and the environment, saying it exceeds the financial-materiality approach used in U.S. law.
The dispute revives trade tension between Washington and Brussels over how far EU sustainability rules can reach beyond its borders. A European Commission (EC) representative said the EC had made considerable efforts "to cooperate with the US to increase trade where possible," but added, "We have been very clear and consistent on the fact that neither our rules framework nor our regulatory autonomy are up for negotiation."
The outcome could affect compliance costs for U.S. companies operating in Europe and shape how much standardized ESG data remains available to investors comparing companies across markets. It also raises the broader question of whether sustainability regulation becomes a recurring flashpoint in U.S.-EU trade relations, alongside existing U.S. criticism of the EU's Carbon Border Adjustment Mechanism.
The EU began narrowing both directives through its Omnibus I simplification initiative in February 2025, when the EC proposed amendments to "cut red tape and simplify EU rules." The European Parliament voted 428-218 to approve those amendments in December 2025.
Separately, the Commission revised the European Sustainability Reporting Standards (ESRS), which establish the specific disclosure requirements for companies covered by the CSRD. The Commission finalized the standards on July 3, 2026, cutting CSRD's mandatory reporting data points by more than 60%. The Omnibus changes also raised the CSRD threshold to €450 million in revenue and 1,000 employees, reducing the number of companies subject to the directive by 90%.
The changes also raised the CSDDD's employee threshold from 1,000 to 5,000 workers and its revenue threshold to €1.5 billion (about $1.75 billion). Together these changes cut the number of non-EU companies expected to fall within CSRD's scope from roughly 10,000 to about 1,200.
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