Washington warns EU of procurement retaliation over ‘made in Europe’ budget rules

A new transatlantic procurement dispute

The United States has warned European Union lawmakers that it may withdraw procurement concessions if the bloc expands rules favouring European-made products in its next long-term budget. Euronews reported on September 15 that a US non-paper sent to EU legislators objected to European-preference provisions in the proposed competitiveness fund, particularly those affecting defence purchases. Washington argues that the approach could obstruct industrial cooperation with American companies.

The disputed fund is part of the EU's proposed 2028-2034 Multiannual Financial Framework. Euronews puts its value at €402 billion across the full competitiveness portfolio, while the Commission's official budget material describes €409 billion for competitiveness under its broader presentation. The official proposal also assigns €131 billion to the defence, security and space window. Those figures refer to related but differently defined budget groupings and should not be treated as interchangeable.

According to the US document, further European-preference measures in defence funds could lead Washington to review existing Buy American waivers and exemptions connected to Reciprocal Defence Procurement Agreements with 19 EU member states. The agreements help eligible foreign suppliers compete for some US defence contracts. Removing concessions could therefore restrict European companies just as the EU seeks to direct more of its own public financing toward production inside Europe.

Competing models of industrial security

Washington proposed a less restrictive model based on products made with Europe, or made within NATO for defence programmes. That formula would preserve access for US and other allied suppliers. Supporters of a stricter European rule argue that public money should build the bloc's industrial capacity, reduce strategic dependencies and improve its ability to supply Ukraine and its own armed forces without relying excessively on external manufacturers.

The dispute also exposes differences inside Europe. France has strongly promoted strategic autonomy and local production. Germany and several other governments have generally preferred more flexibility to purchase from NATO partners when European suppliers cannot meet requirements for price, volume or delivery time. The Council's June negotiating position on the Global Europe programme preserves open competition while permitting European preferences in strategic areas such as energy, digital infrastructure and critical systems.

No retaliation has yet taken effect. The immediate issue is whether the US warning changes negotiations among EU governments and legislators before the budget is finalised. The Commission and member states must decide how narrowly to define eligible European content, what exceptions to permit and whether defence-readiness goals justify the risk of reciprocal restrictions. The result will shape not only trade relations but also how the transatlantic alliance divides the cost and industrial benefits of rearmament.