The United States is intensifying its opposition to European ESG regulations, signaling a potential trade conflict over sustainability policies. Howard Lutnick, Trump’s nominee for Commerce Secretary, recently criticized the Corporate Sustainability Due Diligence Directive (CSDDD) during a Senate hearing, arguing that it places a “significant burden” on American businesses. He suggested that the U.S. government may leverage “commercial tools” to challenge these EU directives, reinforcing the broader economic tensions between the two regions. This move aligns with the Trump administration’s broader skepticism toward ESG regulations, which it views as restrictive for businesses. 

The CSDDD and the Corporate Sustainability Reporting Directive (CSRD) are core elements of the European Green Deal, aimed at holding corporations accountable for their environmental and social impact. These regulations require companies operating in the EU to ensure their entire supply chain aligns with ESG principles, including labor rights, environmental protection, and ethical business practices. Firms must also implement transition plans toward carbon neutrality, with non-compliance carrying penalties of up to 5% of a company’s turnover. The CSRD adds further layers of accountability, mandating rigorous sustainability reporting for large firms generating over $150 million in revenue. 

Despite the EU’s push for stronger ESG policies, opposition is growing both internationally and within Europe itself. Many U.S. corporations have expressed concerns over compliance costs and operational challenges. The Biden administration has also been critical of certain aspects of the regulations, with the American Chamber of Commerce to the EU calling for delays and modifications. In Europe, key players like Germany and France, along with right-leaning political parties, have advocated for scaling back the rules, arguing that they impose excessive burdens on businesses. 

As the European Commission prepares to introduce revisions under the Omnibus Package on February 26, the future of the EU’s carbon neutral strategy hangs in the balance. The outcome of these debates will determine whether Europe can uphold its ESG ambitions despite mounting resistance from global trade partners. 

Sources: 

https://www.renewablematter.eu/en/us-threatening-war-against-european-esg-directives 

https://www.bruegel.org/first-glance/how-should-eu-react-us-attack-corporate-sustainability 

https://www.reuters.com/sustainability/boards-policy-regulation/comment-why-europe-must-hold-its-nerve-raising-esg-bar-business-2025-02-04/