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US demands EU ease digital regulations in exchange for lowering 50% steel/aluminum tariffs, creating major transatlantic trade standoff. July 2025 agreement strained as Washington links tech rules to tariff relief.
Transatlantic Trade Tensions Escalate Over Digital Regulations
Washington is demanding that Brussels roll back its landmark digital regulations in exchange for lowering punishing 50% tariffs on European steel and aluminum exports, creating a major standoff in transatlantic trade relations. The dispute comes just months after the EU and US reached what was supposed to be a stabilizing trade agreement in July 2025.
The Core Conflict: Digital Sovereignty vs. Trade Access
US Commerce Secretary Howard Lutnick explicitly linked the two issues during recent high-level meetings in Brussels, telling EU trade ministers that Washington would only consider reducing steel and aluminum tariffs if the EU eases its digital regulatory framework. 'If ministers can come up with that balanced approach, which I think they can, then we will – together with them – handle the steel and aluminum issues,' Lutnick stated after the meeting.
The US position represents a significant escalation in what had been simmering tensions over Europe's Digital Services Act and Digital Markets Act. These regulations, which aim to create fairer digital markets and protect consumers, have particularly affected US tech giants like Google, Apple, Amazon, and Meta.
July Agreement Under Strain
The July 25 agreement between European Commission President Ursula von der Leyen and US President Donald Trump was supposed to restore 'stability and predictability' to transatlantic trade. Key provisions included 15% tariffs for most EU exports, zero or near-zero tariffs on aircraft and natural resources, and a joint effort to protect steel and aluminum sectors from unfair competition.
However, implementation has been slow and contentious. The agreement still awaits approval by the European Parliament, and both sides continue to push for additional concessions. 'We realize that we still have a lot of work ahead of us, especially in the area of steel and derivatives, where we are trying to reduce tariffs and jointly address global overcapacity,' said European Commissioner for Trade Maroš Šefčovič.
Digital Pressure Intensifies
The US demands come amid ongoing enforcement actions against American tech companies. In recent months, the European Commission has fined Google €2.95 billion and Apple €500 million for DMA violations, while Meta faced a €200 million penalty for its 'pay or consent' model.
US Trade Representative Jamieson Greer expressed Washington's concerns, stating: 'The United States has had significant concerns for many years about the Digital Markets Act and similar legislation in the EU. Many times US companies are almost exclusively affected, enforcement is quite aggressive at times and fines can be high.'
EU Pushes Back on Digital Linkage
Brussels has firmly rejected the connection between digital regulations and tariff relief. Šefčovič emphasized that 'our laws are not discriminatory, they are not aimed at American companies.' He added that the Commission was ready to address US concerns but only when Washington was prepared to discuss European worries about market access.
The EU's position reflects its commitment to digital sovereignty. As one Commission official stressed: 'Our sovereign digital legislation is not up for negotiations.' This stance puts the bloc in a difficult position, as the steel tariffs are causing significant economic pain across member states.
Member States Feel the Pinch
The economic impact varies across the EU. Poland's Prime Minister Donald Tusk estimated his country could lose about €2 billion due to the 15% tariffs. Bulgaria's Economy Ministry calculated direct impacts of €468 million with additional indirect effects of €158 million. Germany, meanwhile, appears more sympathetic to US concerns about digital regulation.
German Economy Minister Katherina Reiche called for fewer digital rules and greater AI implementation, stating: 'Without the implementation of AI models, there will be no bright future.' This suggests potential divisions within the EU bloc on how to approach the digital regulation issue.
Common Ground on China
Despite the tensions, both sides found some agreement on addressing Chinese overcapacity. Czech Minister of Industry and Trade Lukáš Vlček noted: 'The point is that we can find some common solution, because the real trade opponent here is China, not the United States.'
In October, the EU moved to double tariffs on foreign steel to shield its industry from cheap Chinese exports, showing alignment with US concerns about global market distortions.
What Comes Next?
The standoff creates a delicate balancing act for European leaders. They must protect their regulatory autonomy while addressing the economic damage caused by US tariffs. With the European Parliament still needing to approve the July agreement and member states pushing for sector-specific exemptions, the path forward remains uncertain.
As Danish Foreign Minister Lars Løkke Rasmussen summarized: 'We didn't only discuss bilateral issues, but also some of the challenges we are facing together.' The coming months will test whether transatlantic partners can bridge their differences or whether digital regulation becomes the latest flashpoint in an increasingly tense relationship.
