When Bipartisanship Should Work against Existential Threats to Jobs and our Economy
Late last year, the American Council for Capital Formation joined several other prominent American business organizations in encouraging the Trump Administration to engage with its European counterparts and express grave concerns with the European Union’s (EU) Corporate Sustainability Due Diligence Directive, or “CS3D” as it’s commonly known.
The CS3D forces large American companies with ties to the European market to identify and mitigate potential social and environmental risks across every stage of a product’s life cycle, from sourcing to disposal. Companies “in scope” will be responsible for the actions of their direct business partners and will have to assess the risks posed by even their indirect business partners if there is a prospect of an adverse impact. As a result, the CS3D’s compliance requirements would stretch deep into manufacturers’ supply chains, extending to small, privately held American businesses across the country. Simply put, the CS3D amounts to international intervention in our already robust and effective domestic regulatory system.
Our letter to Secretaries Scott Bessent, Howard Lutnick, and Chris Wright, as well as U.S. Trade Representative Jamieson Greer and National Economic Council director Kevin Hassett, co-signed by the U.S. Chamber of Commerce, National Association of Manufacturers, Small Business and Entrepreneurship Council, and the International Franchise Association, urged the Administration to underscore with European officials that EU’s recently passed omnibus legislation also include removal of the CS3D’s extraterritorial provision, which extends its compliance requirements beyond EU boundaries.
Despite our collective appeals, however, the EU kept extraterritorial reach in place. The U.S. government will now need to take stronger steps and an even more active approach toward preserving its legislative and regulatory sovereignty. Such action, beyond tariffs or sanctions, could include legislation designed to protect American businesses from CS3D requirements. This is an approach firmly rooted in bipartisan precedent with legislation prohibiting U.S. participation in the EU’s emissions trading system which was unanimously passed by the Senate and in the House by voice vote, and ultimately signed into law by President Obama in 2012.
The CS3D has become somewhat of a proxy in the long debate over how to define sustainability and incorporate associated principles into corporate and government policy. It need not be. Let’s set aside the merits of driving sustainability in the context of the CS3D and better appreciate the implications. New data in Harold Furchtgott-Roth’s recent paper, “The EU’s December 2025 Changes to CS3D: Quantifying Costs to U.S. Industry,” shows that “mid-to-large states [would] face job losses ranging from 20,000 to 100,000 jobs.” States like Texas, New York, Michigan, Illinois, Ohio, Pennsylvania, and Florida “each face one-time losses ranging from 20,000 to 50,000 workers.” Pennsylvania, Michigan, Florida, Illinois, Texas, and Washington “are each projected to lose over $2 billion in total worker pay.”
For example, the effects in Virginia alone would be extraordinary. Expected one-time costs associated with CS3D compliance total nearly $21 billion, with more than $320 billion in revenue threatened. More than 155,000 Virginia small businesses in the agriculture, mining and energy, manufacturing, IT and tech, and finance industries are most at risk. As Mr. Furchtgott-Roth states, it poses “an existential threat.” And let’s remember, small businesses are the backbone of state and U.S. economic growth.
Allowing European intrusion into our regulatory system, guided by international conventions Congress has not even considered much less endorsed, further complicates an already complex and heavily debated domestic process. Is the CS3D truly about sustainability, or is more about disadvantaging American businesses facing competition from European industry?
Certain U.S. policymakers may endorse CS3D’s objectives as much as their counterparts on the other side of the political spectrum may reject them. But that’s not the point here. Through the CS3D, U.S. legislative and regulatory sovereignty is being challenged by members of a foreign parliamentary system with support from the president of an international body that no one in the U.S. voted to elect.
It is essential for both Republicans and Democrats to collaborate in safeguarding and upholding national sovereignty, irrespective of differing political perspectives, thereby ensuring that American businesses remain competitive and capable of growth. Policy approaches should be subject to thorough debate and consideration within Congress and implemented in accordance with constitutional procedures, rather than being influenced or directed by external entities.
Mike Roman is a Senior Fellow for the American Council for Capital Formation
