Forget Tariffs, The Trump Administration Must Rein In The EU

“If you want to be a brand and want to make it work, you need to make it work in the U.S.” Those are the words of Anna Worthington, director for Ruffians, which is a small chain of barbershops in England. Worthington’s comments were made to the New York Times.

They’re very telling. And they’re a reminder of the extraordinary importance of the U.S. market to producers outside the U.S. Just as New York City has long been seen as the “final test” (quoting Ken Auletta) for Americans eager to make their professional mark, it’s plain that the United States has similar qualities for those producing outside the U.S.

It’s hopeful that the Trump administration will keep the above in mind not with expanded tariffs as the proverbial cost of doing business stateside, but in consideration of regulation endured by U.S. commercial entities overseas. Getting more specific, the EU’s Corporate Sustainability Due Diligence Directive (CS3D) and Corporate Sustainability Reporting Directive (CSRD) presently exist as substantial taxes levied on U.S. corporations for having the temerity to meet and lead the needs of customers in European markets.

It unearths a paradox found in the comment by Worthington. The U.S. is where non-U.S. brands very much want to be, but the very appeal of the U.S. market logically explains the global appeal of brands and businesses hatched in the U.S. To use but one non-European example of the extraordinary reach of Americana, there are over 5,500 McDonald’s stores in China on the way to 10,000 by 2028, over 7,000 Starbucks stores there too, and then Chinese purchases account for a fifth of Apple iPhone sales. In other words, one of the reasons the U.S. is such a great market is that the products and services of American companies are coveted all over the world.

This looms large with the EU directives previously mentioned. They apply to businesses with annual EU revenue that exceeds 450 million euros, which as the previous paragraph alludes, indicates that the directives apply in substantial amounts to American companies. Again, what makes the U.S. markets so attractive is what makes American products and services attractive overseas.

It’s a paradox, but also a costly one thanks to the excesses of EU regulators. It’s not just that they’re imposing all manner of directives within Europe, and that plainly exist as a tax on growth in Europe, it’s that EU regulators are attempting to globalize the directives. As a report from the U.S. Chamber of Commerce conveys, “the EU is in effect asserting regulatory primacy even across company operations with no territorial link to the EU. U.S.-headquartered companies must align their global operations with EU standards derived from international instruments that are not binding under U.S. law, and may be held liable in EU courts for U.S.-based conduct that is lawful in the U.S.”

The Chamber report indicates that EU directives about corporate sustainability aren’t just burdensome, the reporting requirements aren’t just expensive, but U.S. companies are expected to abide rules associated with the directives well outside the confines of the EU. Which is where the Trump administration will ideally come in.

Some reading this will perhaps conclude that the Trump administration will and should use the threat of tariffs on incoming products as the way to right a grievous EU regulatory wrong, one that the Hudson Institute’s Harold Furchtgott-Roth projects could cost American businesses to the tune of $1 trillion. But tariffs shouldn’t be threatened simply because they harm Americans in addition to those they’re imposed on.

Instead, it simply needs to be made clear from the top of the federal government that American firms do not answer to EU regulators for their actions stateside, and they will in no way be expected to align their operations with EU directives. If there’s any confusion about this, U.S. officialdom will hopefully supply them with the quote from Anna Worthington, and that clarifies who does economic growth better and who needs whom more.