The United States has initiated a formal examination of the European Union’s Carbon Border Adjustment Mechanism (CBAM), bringing carbon costs, industrial competitiveness and access to European markets into focus as potential sources of transatlantic trade friction.
The Office of the United States Trade Representative (USTR) launched a public consultation on 8 October 2026, seeking evidence on whether the EU’s carbon border policy disadvantages US manufacturers, raises export costs or restricts access to the European market. The consultation remains open until 9 November 2026.
The review also examines proposals to expand CBAM beyond primary industrial materials to cover hundreds of finished products. Washington is requesting information on compliance expenditure, market access, competitive conditions and potential enforcement measures.
No formal trade remedy or retaliatory action has resulted from the process so far.
US exporters face scrutiny over CBAM compliance costs
The US review comes as CBAM moves into its definitive phase, increasing the importance of emissions data and carbon-related costs in trade with the EU. For American manufacturers, meeting the requirements involves more than accounting for the carbon price associated with their products.
Exporters must establish industrial monitoring systems, obtain external verification and coordinate emissions reporting with European customers. These requirements introduce additional compliance work and costs for companies seeking to maintain access to the EU market.
The potential extension of CBAM to downstream goods represents a further concern for US industry. Under the proposals being examined, exporters of machinery, fabricated metal products and industrial components could face new reporting and compliance obligations, including for products that are not currently within the mechanism’s scope.
The consultation therefore covers both the existing framework for carbon-intensive imports and the possible commercial consequences of a broader product coverage.
Certificate pricing and obligations under the definitive regime
CBAM entered its definitive phase in January 2026, covering imports of steel, aluminium, cement, fertilisers, hydrogen and electricity. Importers are accumulating obligations associated with the embedded emissions of covered goods, while the purchase of certificates for 2026 imports is scheduled to begin in February 2027.
The European Commission’s latest certificate price, €82.32 per tonne of CO₂ for the third quarter, provides a reference point for the carbon costs associated with the mechanism.
The amount payable by importers depends on several factors, including product-specific embedded emissions, applicable benchmarks, adjustments for free allocation and recognised carbon prices already paid in the country of origin.
These variables mean that the financial impact differs across products and suppliers. Demonstrating emissions performance and establishing the applicable carbon cost are therefore central to exporters’ commercial arrangements with European buyers.
Trade uncertainty extends beyond the United States
The USTR consultation has implications for other economies exporting industrial goods to Europe. India, Türkiye and China, alongside other manufacturing exporters, are monitoring Washington’s approach to the EU mechanism.
A negotiated adjustment between the United States and the EU could prompt other trading partners to seek similar treatment. However, any bilateral concession would not automatically grant equivalent exemptions to other countries.
For European importers, the review adds uncertainty to long-term procurement decisions. Companies must account for potential carbon costs when negotiating supply agreements without knowing whether future discussions will change CBAM’s calculation methodology, product coverage or enforcement practices.
Financial institutions that provide funding for cross-border industrial trade also face uncertainty over future operating margins and the competitiveness of financed contracts.
Carbon pricing and industrial trade policy converge
The US review places CBAM at the intersection of emissions pricing, industrial policy and international market access. Its implications extend beyond the immediate cost of carbon for steel and aluminium producers to the rules governing trade in a wider range of manufactured goods.
The central question is whether the EU mechanism develops into a more widely accepted framework for carbon pricing in international trade or faces increasing challenges as an instrument affecting industrial competitiveness.
For exporters serving the European market, the existing commercial requirements remain in place while the US consultation proceeds. Companies able to provide reliable, independently verified emissions data are better positioned to demonstrate their environmental performance and support continued access to EU customers, irrespective of the review’s eventual outcome.
