The European Union has pushed back against renewed pressure from the United States over the bloc’s environmental and supply-chain regulations, insisting that its regulatory autonomy is not open to negotiation.

The latest dispute comes as Washington steps up scrutiny of EU trade and climate policies, accusing the bloc of placing an unfair burden on American businesses and allowing Chinese goods to avoid US tariffs through third countries.

US Demands Changes to EU Rules

US Ambassador to the EU Andrew Puzder called on Brussels to align two major corporate sustainability laws with the terms of the US-EU trade agreement reached last year.

Puzder posted his concerns on X, alongside a US government document outlining Washington’s objections to the EU's regulations.

The document warned that the United States could take further action against what it described as unreasonable burdens placed on American companies if the concerns were not addressed.

Brussels Defends Regulatory Independence

The European Commission rejected the suggestion that Washington could dictate changes to the bloc's regulatory framework.

Commission spokesperson Arianna Podesta said the EU and US continued to discuss both tariff and non-tariff issues and described the engagement as constructive.

However, she stressed that Brussels had been consistent in defending its authority to establish its own rules.

“We have been very clear and consistent on the fact that neither our rules framework nor our regulatory autonomy are up for negotiation,” Podesta said.

Sustainability Laws at Centre

The dispute centres on the Corporate Sustainability Due Diligence Directive (CSDDD) and the Corporate Sustainability Reporting Directive (CSRD).

The CSDDD requires large companies to identify and address adverse human rights and environmental impacts across their global supply chains.

The CSRD requires companies covered by the rules to report information related to climate impacts, emissions and measures taken to reduce them.

Washington argues that the regulations have an extraterritorial impact and impose costly compliance requirements on US businesses operating in the European market.

EU Has Already Reduced Scope

The EU has already modified and delayed parts of both regulations following pressure from businesses within and outside the bloc.

The changes reduced the number of companies covered by certain requirements and pushed back implementation timelines.

However, the US government document argued that these measures did not go far enough to address American concerns.

The disagreement reflects a wider clash between Washington's push to reduce regulatory barriers for US companies and Brussels' effort to maintain its environmental and corporate governance standards.

Carbon Border Tax Also Targeted

The latest dispute follows criticism from Puzder of the EU's Carbon Border Adjustment Mechanism (CBAM).

The US ambassador argued that the carbon border levy effectively functions as a tariff despite being presented by Brussels as a climate policy measure.

CBAM is designed to impose a carbon-related cost on certain imported products as the EU seeks to prevent companies from shifting production to jurisdictions with weaker environmental standards.

Washington Raises China Transshipment Concerns

The EU has also been named in a separate White House report examining the risk of illegal transshipment of Chinese goods.

Washington has accused several trading partners, including the EU, Mexico, Canada and Japan, of potentially being used as routes through which Chinese products could enter the US market while avoiding tariffs imposed by the Trump administration.

The report said the United States plans to use artificial intelligence to strengthen its ability to identify and detect suspected customs violations.

EU Agrees on Customs Fraud Fight

Brussels rejected any suggestion that it supports customs fraud but acknowledged the need for continued cooperation with Washington.

“The EU shares the US objective of tackling customs fraud,” Podesta said.

She added that the European Commission was engaging with US officials to better understand the potential implications of the White House report.

At the same time, Brussels noted that the report identified the EU's transshipment risk as being embedded within broad legitimate trade flows.

Trade Tensions Could Continue

The latest exchange highlights the growing complexity of the EU-US economic relationship, where cooperation on trade is increasingly accompanied by disagreements over climate policy, corporate regulation and China's role in global supply chains.

While both sides continue discussions on tariffs and other trade issues, the EU's firm defence of its regulatory independence suggests that negotiations over environmental standards and market rules could remain contentious.

The dispute also comes as Washington seeks greater protection for American businesses and tighter enforcement against Chinese goods entering the US market through third countries, potentially creating further pressure on the EU's trade relationship with the United States.