US Extraterritoriality: The Trump Card

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US Extraterritoriality: The Trump Card

Authors

Georgina Wright

Resident Senior Fellow and Deputy Director for International Studies

Georgina Wright is Senior Fellow and Deputy Director for International Studies at Institut Montaigne.

Louise Chetcuti

Former Project Officer - United States and Transatlantic Affairs

Louise Chetcuti has been US and Transatlantic Affairs Project Officer since February 2023.

Extraterritoriality — the application of national laws abroad — has grown exponentially over the last two decades. In a world characterized by strategic competition and weak international organizations, many countries are turning to law to secure their interests. None more than the United States.

There are good and bad uses of US extraterritoriality. It has become a key tool to uphold international law and to safeguard the US’ interests. It has helped to sanction hostile states and combat corruption, money laundering, organized crime and terrorism. It has helped to reduce excessive risk-taking by companies and has been used to manage US-China systemic rivalry. However, the US has also been accused of using it as a way to assert market dominance.

Could extraterritoriality be the next Trump Card the United States plays? During his first term, President Trump tightened export controls and expanded US laws to combat human rights abuses. At the same time, he rolled back banking regulations and asked his team to review US laws that created unnecessary red tape. Recently, he warned that he would remove any sanctions that weakened the dollar’s dominant position. The extent to which extraterritoriality is used to exert political pressure on EU countries is unclear.

The EU must be better prepared. Companies that fail to comply with US rules risk huge fines, handover of sensitive data and exclusion from the US market. European companies often prefer to comply with US rules, rather than abide by European measures designed to block their application. This poses a direct challenge to the sovereignty of the EU and its member states.

Institut Montaigne’s latest issue paper provides a framework for understanding all dimensions of US extraterritoriality and offers decision-makers and businesses a roadmap for an informed response. Understanding the implications of US extraterritoriality is crucial for governments and businesses, and should be integral to the EU's approach to economic security.

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China’s Extraterritoriality:
A New Stage of Lawfare

Extraterritoriality is on the increase, particularly in China. Under Xi Jinping, China uses this practice to defend itself against external interference, legitimise its foreign policy and extend its security agenda. Although it is exploring a more offensive approach, its use will depend on the strategic calculations of China's leaders, particularly in the face of international tensions. The European Union must be prepared to respond, in particular by using access to the European market as a deterrent.

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