Washington has launched an investigation into whether the European Union’s Carbon Border Adjustment Mechanism (CBAM) is harming US trade, risking fresh tensions. According to an official document published Thursday, the Office of the US Trade Representative (USTR) is seeking comments on how CBAM affects American exporters, and on how the EU’s proposals to broaden it could create unfair barriers. US companies have until 9 November to submit their views.
CBAM took effect in January 2026 and covers imports of aluminium, cement, fertilisers, hydrogen, iron and steel. EU importers must monitor and report the emissions embedded in the goods they bring into the bloc. The aim is to level the playing field with foreign competitors and stop carbon-intensive production from relocating to countries with weaker climate rules. Washington argues the system creates financial liabilities for US firms. It also objects that the EU adds a “punitive markup” to default emissions values, effectively penalising companies that do not supply their own data.
The timing is notable. The WTO recently agreed to set up a panel, at Russia’s request, to examine CBAM’s legality. Moscow claims the tax creates significant trade barriers and that free carbon allowances for heavy industry under the EU Emissions Trading System amount to an export subsidy.
Inside the EU, negotiations on extending CBAM to further products, such as washing machines and car parts, are proving difficult. Ireland, which holds the rotating Council presidency, says governments and the European Parliament both view the Commission’s proposal as too narrow, but they disagree on what to add. Some MEPs want critical clean technology such as solar panels and heat pumps included, a step that could protect European manufacturers but raise costs for businesses and consumers.
Other sticking points include the Commission’s proposed power to temporarily exempt goods in “serious and unforeseen circumstances”, which MEPs oppose over concerns about weakened oversight. Parliament also wants default carbon values applied automatically to high-risk goods and origins, while the Council would let firms keep using actual emissions data if properly evidenced. The Irish Presidency hopes to secure a deal at a key meeting on 20 October.
At DMX Associates, we are monitoring developments in EU carbon regulation and transatlantic trade relations.Stay up to date via our website and LinkedIn page.
