The United States has warned the European Union that it could respond with retaliatory measures if the bloc keeps proposed “made in Europe” provisions in its next long-term budget. The dispute centres on a planned competitiveness fund that would favour EU-based production, including in the defence sector.
The warning adds a new layer to already difficult transatlantic relations, with Washington arguing that European preference rules could restrict access for American companies and weaken defence-industry cooperation. EU member states are still discussing the 2028–2034 budget, so the provisions have not yet become final EU law.
What the US has threatened
A document sent to EU legislators and seen by Euronews says Washington could review possible responses if European preference measures are expanded in EU defence funding. Among the options mentioned is a rollback of existing “Buy American” waivers and exceptions connected to Reciprocal Defence Procurement Agreements with 19 EU member states.
The document is described as a non-paper, meaning it sets out a position or warning rather than creating a legally binding decision. It says that further European preference provisions could impede partnership and collaboration with the United States.
Washington has instead called for a broader “made with Europe” approach. In defence, it has proposed a “made in NATO” model that would potentially give eligible companies across the alliance access to procurement or funding opportunities.
Why the EU budget is at the centre of the dispute
EU countries are negotiating the bloc’s next multiannual financial framework, covering the period from 2028 to 2034. The draft plans include a €402 billion competitiveness fund intended to support strategic production and strengthen the European economy.
The fund would cover key goods and sectors, including defence. Its European preference provisions could make EU financing conditional on production taking place within the Union or on companies meeting requirements linked to European supply chains.
Supporters of the approach argue that public money should strengthen the EU’s industrial capacity and reduce strategic dependencies. The policy is particularly relevant to defence, where governments are seeking more resilient supply chains and greater production capacity within Europe.
Foreign companies and governments, however, have raised concerns that the rules could shut them out of the EU market or place them at a disadvantage when competing for publicly supported projects.
How the disagreement affects defence cooperation
The dispute follows tensions over the Security Action for Europe programme created in 2025. That initiative had already raised concerns in Washington because of provisions favouring European participation in joint purchases of arms and military equipment.
The latest US warning focuses on the interaction between EU funding rules and existing defence-procurement arrangements. The United States currently benefits from certain exceptions to “Buy American” requirements for some EU countries under reciprocal procurement agreements. A withdrawal of those concessions could make it harder for European firms to access US defence contracts.
The practical consequences would depend on the final EU budget, any changes adopted by member states and the response ultimately chosen by Washington. The warning is therefore a political and trade-policy signal rather than an immediate change to procurement rules.
Wider trade tensions between Washington and Brussels
The budget dispute comes amid broader disagreements between the EU and the United States. Since the beginning of the second Trump administration, the two sides have faced repeated tariff threats and disputes over environmental and digital regulations.
US officials have criticised several European measures as non-tariff barriers, while EU policymakers have defended them as rules designed to protect consumers, regulate large technology companies and support European economic resilience.
The European Commission had hoped that a trade agreement concluded in July 2025 would help create a more stable transatlantic relationship. The disagreement over the EU budget suggests that tensions remain in areas where trade, industrial policy and security overlap.
What happens next?
The EU’s long-term budget must still pass through negotiations before it can be adopted. Member states will need to agree on the overall framework and its funding conditions, while the European Parliament will also have a role in the budgetary process.
Key questions include:
- How strictly will the competitiveness fund define European production?
- Will defence funding use a “made in Europe” model or a wider eligibility system?
- Will the final rules apply to US companies, subsidiaries or suppliers based in Europe?
- Will Washington withdraw procurement waivers or pursue other responses?
No final decision has been announced on the threatened US measures, and the EU budget remains under negotiation. The eventual outcome could influence not only access to EU funding but also the future shape of transatlantic defence-industrial cooperation.
Why this matters for Ireland
Ireland is an EU member state and would be covered by the final 2028–2034 budget framework. The direct effect would depend on the final design of the competitiveness fund and the projects supported through it.
Irish companies could be affected if access to EU-backed programmes depends on European ownership, production or supply-chain requirements. At the same time, stronger EU support for strategic industries could create opportunities for businesses involved in technology, manufacturing, research or defence-related supply chains.
Because Ireland is not a member of NATO, a “made in NATO” approach could also raise different questions for Irish policymakers and firms than a system based solely on EU eligibility. The details will depend on the legal text ultimately agreed.
Conclusion
The US warning marks a significant escalation in the debate over EU industrial policy and defence funding. The planned competitiveness fund is not yet final, but its proposed European preference rules could affect American access to EU-backed projects and trigger changes to reciprocal procurement arrangements. The next stage will be the negotiation of the 2028–2034 budget, where the balance between European strategic autonomy and open transatlantic cooperation will be closely contested.
