link to page 1 
Updated June 9, 2023
U.S.-EU Trade and Economic Relations
The United States and the European Union (EU), each
and regulatory issues. Some urge for more concrete
other’s largest overall trade and investment partners, have a
“deliverables,” particularly on longstanding U.S. trade
highly integrated economic relationship (see Figure 1).
concerns with the EU. Others see the TTC dialogue process
Their trade policies largely align on many fronts, but
of relationship-building as an outcome in and of itself.
tensions emerge periodically on specific issues. Many
Critical Minerals Agreement (CMA) Negotiations. The
observers agreed that bilateral trade relations were
United States and the EU have prioritized cooperation on
especially fraught during the Trump Administration. During
the Biden Administration, which pledged “to repair and
climate policies, but differ over some approaches. The EU
strongly opposes some electric vehicle (EV) tax credit
revitalize the U.S.-EU partnership,” U.S.-EU trade relations
requirements under P.L. 117-169, commonly referred to as
have seen renewed engagement, but trade frictions persist.
the Inflation Reduction Act of 2022 (IRA), asserting that
In the 118th Congress, Members may continue to oversee
the provisions discriminate against foreign companies and
and legislate on various aspects of U.S.-EU trade relations.
violate World Trade Organization (WTO) obligations
Figure 1. U.S. Trade and Investment with the EU
related to non-discrimination and subsidies prohibitions. In
March 2023, the United States and the EU launched
negotiations on a targeted CMA, to enable critical minerals
extracted or processed in the EU to count toward certain EV
tax credit requirements of the IRA. A potential CMA likely
would not include removal of tariffs on relevant products
since tariff liberalization has not been a focus of the Biden
Administration’s current trade policies.
After controversy spurred by the U.S.-Japan CMA,
concluded in March, the United States may seek binding
commitments from the EU in a CMA, which could require
the European Commission to receive a formal negotiation
mandate from EU members. While it is possible that a
potential CMA would not require changes to U.S. law,
some Members oppose the current lack of a formal role for
Congress in the negotiations. Some Members also call for
the talks to address U.S. trade concerns with the EU (e.g.,
digital policies).
Source: CRS, with data from U.S. Bureau of Economic Analysis.
Potential Comprehensive Free Trade Agreement (FTA).
Trade Initiatives and Negotiations
While U.S. and EU markets are relatively open, certain
tariff and nontariff barriers constrain U.S.-EU trade and
The United States and the EU are cooperating on bilateral
have been the focus of periodic U.S.-EU FTA negotiations.
and global trade issues through executive-led trade efforts.
The Trump Administration led the most recent such efforts,
U.S.-EU Trade and Technology Council (TTC). Taking a
doing so under now-expired Trade Promotion Authority
(TPA). Seen by many as an attempt to defuse escalating
central role in bilateral trade relations is the TTC, launched
by the United States and the EU in June 2021 to promote
bilateral trade tensions, the talks stalled over disagreement
their shared prosperity and competitiveness through
on scope—in particular, the EU’s desire to exclude
agricultural tariffs, the inclusion of which some Members
collaboration in working groups. A key TTC focus since
2022 has been coordination of U.S.-EU responses to
prioritized. The EU also was wary of pursuing a broad FTA
Russia’s war in Ukraine (e.g., through export controls).
in light of U.S.-EU inability to conclude a Transatlantic
Trade and Investment Partnership (T-TIP) in the 2010s.
At the fourth TTC ministerial, held in May 2023, the
partners announced initiatives to collaborate further in areas
The Biden Administration has not pursued a comprehensive
such as on: a “roadmap” on artificial intelligence (AI) risk
FTA with the EU. Transatlantic stakeholders have called at
and opportunities; technical standards for key technologies;
times for a U.S.-EU FTA for commercial and strategic
clean energy development; information-sharing to address
reasons. Some studies estimate that a U.S.-EU FTA could
non-market economy (e.g., China’s) policies affecting
have overall positive U.S. economic effects, but its benefits
digital trade and the global semiconductor supply chain;
and costs could vary across industries and workers.
and removing forced labor from global supply chains.
Selected Other Developments and Issues
Some Members and stakeholders support the TTC as a way
U.S.-EU trade relations are multi-faceted and comprise a
to deepen U.S.-EU cooperation on key trade, technology,
range of issues, some generating frictions that the partners
https://crsreports.congress.gov
U.S.-EU Trade and Economic Relations
have sought to address. Other frictions remain,
with U.S. approaches. Some stakeholders call for more
complicating cooperation efforts at times.
cooperation in the TTC on these issues.
Resolutions of Trade Irritants. In 2021, the United States
• EU regulatory measures to limit certain practices in
and the EU tackled some trade frictions, reaching:
agricultural production, as well as uncertainty of and
•
delays in the EU approval process related to the use of
An understanding on a cooperative framework to
agricultural biotechnology. The United States has
address their long-running “Boeing-Airbus” dispute in
longstanding concerns that the EU’s risk-based
the WTO over civil aircraft subsidies. They agreed to
approach to regulations is not always science-based.
suspend dispute-related tariffs while seeking a more
durable solution, and to cooperate on related challenges
• The EU’s treatment of geographical indications (GIs)
posed by non-market economies.
or certain EU-protected names for food, wine, and
•
spirits that many U.S. producers view as generic. The
A deal to replace U.S. Section 232 tariffs on steel and
United States has voiced concern about EU efforts to
aluminum imports from the EU below a specific
incorporate its GI and some of other policy approaches
threshold with a tariff-rate quota system. In exchange,
into its network of FTAs with other countries.
the EU lifted retaliatory tariffs on U.S. products (e.g.,
whiskey and motorcycles). The partners suspended
Meanwhile, some in the EU are wary of U.S. efforts to
their related WTO disputes and are working to reach a
strengthen “Buy American” public procurement rules. A
pact to address steel and aluminum global overcapacity
longtime EU priority is to gain further access to U.S. public
by a self-imposed October 2023 deadline (or risk
procurement markets.
reimposing tariffs on each other).
•
U.S. policymakers also may monitor the EU’s trade policy
Reduction of tensions over digital services taxes
approaches in the context of Administration efforts to
(DSTs) on revenues from certain companies’ digital
cooperate further with the EU to address shared economic
services. The United States reached political
concerns related to China’s industrial policies, role in
agreements with Austria, France, Italy, and Spain for
supply chains, and other issues. The EU, for instance, is
them to take a transitional approach to their DSTs,
finalizing a new anti-coercion instrument, to allow the EU
while implementing a new global tax framework
to deter “economic coercion” by other countries by
concluded in 2021. Per the agreements, the Biden
imposing trade restrictions (e.g., tariffs, export controls).
Administration cancelled tariffs against these countries
(tariffs it already suspended during the global tax
Multilateral Trade
talks); the tariffs stemmed from U.S. Section 301
Post-World War II, the United States and the EU led in
findings that the DSTs discriminate against U.S. firms.
developing the rules-based global trading system
Implementation of the global tax deal faces hurdles.
underpinned by the WTO. Trump Administration threats to
Some stakeholders welcomed these efforts to address
flout WTO rules deeply concerned EU officials. During the
bilateral trade irritants and shift to a “positive” agenda (e.g.,
Biden Administration, the partners pledged to “uphold and
the TTC). Others question the measures’ economic impact.
reform” the trading system, and are cooperating on global
trade issues in the WTO and other venues. A key U.S.-EU
Other Trade Issues. A range of other concerns include:
focus is addressing challenges posed by non-market
• The bilateral Data Privacy Framework, agreed to in
economies such as on global overcapacity, subsidies, forced
principle in March 2022, with an aim to comply with
technology transfer, and global supply chains. Yet, U.S.-EU
EU data protection requirements for cross-border
frictions persist over the continued U.S. practice of
personal data transfers. It would succeed the Privacy
blocking new appointments to the WTO appellate body,
Shield agreement, invalidated by the EU’s top court in
due to U.S. concerns about WTO dispute settlement.
2020, largely over concerns about U.S. surveillance
Issues for Congress
practices. The invalidation created uncertainty over the
In the 118th Congress, Members may oversee current U.S.-
future of cross-border data flows, which are key for
EU trade engagement, including the Administration’s
U.S.-EU trade and investment. The EU could decide on
efforts to reach long-term solutions to tariffs and other
the new framework’s adequacy in the coming months.
•
bilateral trade frictions. They also may assess to what extent
The EU’s carbon border adjustment mechanism
the TTC and CMA negotiations advance U.S. priorities and
(CBAM) to impose a fee on certain carbon-intensive
whether to require a formal role for Congress in them.
imports (e.g., steel, aluminum, cement, fertilizer).
Expected to apply starting in October 2023, CBAM
Looking forward, Members may consider whether to direct
aims to dis-incentivize relocation of carbon-intensive
the Administration to pursue a comprehensive U.S.-EU
production overseas (“carbon leakage”). Possible U.S.
FTA and set negotiating objectives in a potential TPA
policy responses include seeking an exemption from
renewal. They also may examine opportunities to
some EU CBAM duties or creating a U.S. CBAM.
collaborate with the EU to address global trade challenges
• The EU’s approach to
and set global rules for the road, and to what extent U.S.
regulation of digital
and EU approaches align or diverge. Additionally, they may
competition, which some U.S. stakeholders contend
track the overall trajectory of U.S. and EU trade policies,
unfairly targets large U.S. technology firms. In April
2023, the EU designated several U.S. firms as “very
and potential risks for future tit-for-tat tariff escalations or a
large online platforms”
subsidy “race to bottom.” See CRS In Focus IF10930, U.S.-
for enhanced regulation under
EU Trade and Investment Ties: Magnitude and Scope.
its Digital Services Act. EU moves to regulate other
areas of technology, such as AI, also could diverge
https://crsreports.congress.gov
U.S.-EU Trade and Economic Relations
Shayerah I. Akhtar, Specialist in International Trade and
Finance
IF10931
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10931 · VERSION 10 · UPDATED