US Threatens EU with Retaliation Over “Made in Europe” Budget Rules

Washington warns it may punish Europe if the EU keeps favoring its own companies in a huge new budget plan.

The United States has warned the European Union that it could face retaliation if the EU does not remove rules that favor European products in its long-term budget. The warning was sent in a document to EU lawmakers.

The EU is currently discussing its budget for the years 2028 to 2034. This budget includes a €402 billion fund for competitiveness. The fund would favor the production of key goods inside the EU, including in defense. This means foreign companies could be excluded from EU financing.

What the US Said

In the document, the US said the European preference rules would "impede" partnership and collaboration with America. Washington warned it would "review all potential response measures" if the EU expands these rules. One possible response is to roll back existing waivers and exceptions to the "Buy American" law. These waivers currently give 19 EU member states special access to certain US defense contracts.

The US also called on the EU to introduce a "made with Europe" system instead. In the defense area, it suggested a "made in NATO" approach.

Background of Trade Tensions

This is not the first time the US has threatened retaliation over EU policies. Trade tensions have been growing since the start of the second Trump administration. The two sides have clashed over tariffs, environmental rules, and digital regulations that the White House considers unfair trade barriers.

A similar dispute happened in early 2026 over EU defense procurement rules. The US Departments of State and Defense warned that a strict "Buy European" clause would trigger retaliatory measures against European firms.

The European Commission had hoped that a trade agreement reached in July 2025 would lead to a more stable relationship. However, the latest warning shows that major disagreements remain.