CSDDD: EU Red Tape Undermines America’s Manufacturers
A sweeping new European Union regulation could saddle America’s manufacturers with costly red tape—undermining U.S. sovereignty and manufacturing growth here at home.
Important Updates
What’s Happening
The EU’s Corporate Sustainability Due Diligence Directive, initially approved by the Council of the European Union in 2024, has prompted calls from both U.S. and European companies, international business organizations and several EU nations for EU policymakers to scale back this unworkable and extraterritorial mandate
- Trilogue process: Following negotiations between the European Parliament, the European Commission and the Council of the European Union, EU officials announced a preliminary agreement to simplify the directive on Dec. 9, 2025. While the EU made significant modifications to reduce potential compliance costs, the directive still poses a threat to U.S. manufacturers.
- EU nations must act: Member states are required to translate the directive into national law by July 2028. Companies must comply by July 2029.
What It Is
CSDDD forces companies to identify and mitigate potential social and environmental risks across every stage of a product’s life cycle—from sourcing to disposal.
- Extraterritorial impact: U.S. companies with more than 1.5 billion euros in net annual EU turnover would be directly subject to CSDDD.
- Deep reach: Those companies will be responsible for the actions of their direct business partners and will have to assess the risks posed by their indirect business partners if there is a prospect of an adverse impact. As a result, the directive’s requirements could stretch deep into manufacturers’ supply chains, implicating small, privately held, and non-EU businesses.
Why It Matters
The directive would impose sweeping due-diligence requirements on U.S. companies with EU ties—and even those indirectly connected through supply chains.
- Compliance squeeze: The scope of the burdensome mandate would introduce significant operational complexity, compliance costs and potential for bottlenecks and delays throughout the complex, global manufacturing supply chain.
- Liability risk: CSDDD would also expose manufacturers to significant legal liability, as the directive allows EU nations to impose penalties of up to 3% of a company’s global turnover.
What’s at Stake
Manufacturers already face nearly $350 billion in annual regulatory costs at home. CSDDD would add to this burden—subjecting America’s manufacturers to job-killing European red tape and ceding U.S. regulatory authority.
- It would undermine the Trump administration’s progress on regulatory modernization, a priority the NAM has championed from the start.
What’s Next
President Trump has rightly flagged CSDDD as a threat to the trading relationship between the U.S. and the EU, and the U.S.–EU framework agreement announced in August 2025 prioritizes addressing concerns about the impact that CSDDD would have on U.S. companies.
- While meaningful revisions have been made to CSDDD, the EU has not addressed some of its most damaging aspects, including its extraterritorial provision that would apply to manufacturers in America and their suppliers.
- The NAM urges U.S. diplomats to ensure that the CSDDD does not apply extraterritorially by seeking repeal, an exemption for U.S. companies, or limits on the directive’s reach to activities inside Europe.
- The directive awaits final approval from the European Parliament and the Council of the European Union.