A radical European law could devastate the U.S. economy

In May 2024, officials in the European Union passed a radical new law that threatens to deal a severe blow to the U.S. economy, erode individual freedoms and coerce thousands of American companies into embracing a progressive agenda.

If this law takes full effect, the repercussions for Americans could be economically devastating and extremely difficult to reverse.

This sweeping EU legislation, titled the Corporate Sustainability Due Diligence Directive, seeks to impose environmental, social, and governance or ESG mandates on businesses worldwide. ESG is a social credit system that uses non-financial metrics to measure performance, such as companies' commitment to battling climate change or promoting social justice causes.

The legislation applies to large companies operating in EU markets, regardless of their home country. As a result, many American corporations will be covered under the new EU rules.

The directive doesn’t just demand that companies revamp their own business models. It also requires them to pressure their supply-chain partners to align with these ESG mandates, no matter where those entities are based. That means a vast number of small and medium-sized companies will be forced into this scheme as well.

Corporations that fall under the jurisdiction of this directive include EU-based firms with at least 1,000 employees and global revenue exceeding €450 million (about $475 million). Non-European companies, including those from the U.S., are also subject to the regulation if they generate at least €450 million in revenue from their EU operations.

The law mandates that covered businesses curtail land development, limit water usage and minimize and even reverse biodiversity loss. Moreover, the law compels companies to use “green energy,” regardless of the economic hardships such a shift might create, and enforces restrictions on certain kinds of information deemed “disinformation” or “misleading.”

The directive also enhances the power of labor unions and forces businesses to comply with international agreements passed by the EU and United Nations.

Noncompliance comes with heavy financial consequences. Companies that fail to meet the law’s mandates could face penalties amounting to 5 percent of their global revenue. Moreover, the law empowers activists and individuals to initiate lawsuits against businesses they accuse of violations, opening the door to an unprecedented amount of legal abuse.

This regulatory framework will be gradually introduced over the next several years, with full implementation required for the largest companies by 2027. Financial data suggest that numerous iconic American companies — including Amazon, Apple, Google, Ford, Cargill, McDonald’s, Meta and Microsoft — will be affected by this sweeping legislation.

But the harm won’t stop with these and other major corporations. The law mandates that covered companies impose the EU’s ESG mandates on businesses within their “chain of activities,” including many suppliers, distributors and service providers. This applies regardless of how much business those smaller entities conduct in Europe.

For instance, if a manufacturer in Texas supplies parts to build cars for Ford, the Texas manufacturer would be forced by Ford to adopt the ESG regulations, because Ford does a lot of business in the EU and will thus be covered under the law. The same would apply to numerous other businesses that work with Ford, including warehouses, trucking companies and logistics providers.

To enforce compliance, the large U.S. companies covered under the law will need to use contracts to impose the ESG mandates on business partners.

Virtually every sector of the American economy would be affected by this legislation, including the agricultural industry, which does a substantial amount of business with large EU companies and U.S. companies operating there.

Europe's directive is a clear challenge to U.S. sovereignty. Americans have no reason to embrace Europe’s failing policies, yet this directive attempts to force U.S. businesses — and, by extension, all Americans — into submission.

Some political leaders have started to call attention to the importance of this issue. On Feb. 27, congressional leaders, including Senate Banking Chairman Tim Scott (R-S.C.) and House Financial Services Chairman Rep. French Hill (R-Ark.), sent a letter to Trump administration officials in which they outlined serious problems with the European scheme.

Some state lawmakers are demanding action as well. For example, in New Hampshire, state Rep. JD Bernardy (R) introduced a resolution calling on Congress and the president to take action against the law. The New Hampshire House passed the resolution, which will now head to the state’s Senate for approval.

Further, prior to his recent confirmation, Secretary of Commerce Howard Lutnick agreed in correspondence with members of Congress that the Corporate Sustainability Due Diligence Directive will “impose significant costs on thousands of U.S. companies” and that he will “consider using all available trade tools at our disposal” to stop it.

But despite these and other positive developments, the federal government has yet to take any action, and time is running out.

The Trump administration and Congress must act now, by using trade policy and, if necessary, withholding foreign aid to pressure EU lawmakers to stop the Corporate Sustainability Due Diligence Directive regime from ever going into effect. If they fail, the American economy could be pushed into a recession and citizens’ liberties will almost certainly be constrained in the process.

The stakes couldn’t be higher. Let’s hope the Trump administration and Congress rise to the occasion.

Justin Haskins is a New York Times-bestselling author, senior fellow at the Heartland Institute and the president of the Henry Dearborn Liberty Network.

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