US threat of sanctions on EU officials over tech law raises risks for enterprises

The Trump administration is reportedly weighing sanctions on EU officials responsible for enforcing the bloc’s Digital Services Act (DSA), a move that could escalate transatlantic tensions and complicate how US enterprises manage compliance, data flows, and operations in Europe.

Deliberations on this within the State Department are still underway, with no final decision yet on whether to proceed with sanctions that would most likely take the form of visa restrictions, according to a Reuters report.

It is also unclear which European Commission or member state officials might be targeted, though US officials held internal meetings on the matter last week, the report said.

This comes as Trump warned this week that countries imposing digital taxes could be hit with new tariffs on their exports to the United States unless those policies are rolled back.

“I put all Countries with Digital Taxes, Legislation, Rules, or Regulations on notice that unless these discriminatory actions are removed, I, as President of the United States, will impose substantial additional Tariffs on that Country’s Exports to the USA, and institute Export restrictions on our Highly Protected Technology and Chips,” Trump wrote on social media.

Relations between Washington and Brussels are already tense, strained by repeated tariff threats, difficult negotiations, and US complaints about how European regulators treat US technology companies.

Geopolitics threatens enterprise strategy

Sanctioning European officials over the DSA would mark an unprecedented step in transatlantic digital relations. Such a move would extend the use of sanctions into regulatory disputes, creating new uncertainty for US companies operating in Europe.

“Brussels will likely view this as extraterritorial pressure and respond in kind,” said Nitish Mittal, partner at Everest Group. “This has to be viewed in the global context of recent US-led tariff turbulence. This could include using the EU Blocking Statute to bar EU firms from complying with US sanctions and considering reciprocal measures against US officials. This raises direct conflict-of-law risk for US platforms with EU subsidiaries.”

The dispute could also spill into trade and regulatory channels, including new Section 301 tariff actions and faster, tougher enforcement of the Digital Markets Act (DMA) and DSA, Mittal added. That could complicate product launches, approvals, and procurement in the EU.

Compliance costs rise with conflicts

The tensions are also transforming compliance from a procedural duty into a potential barrier to digital growth. Companies risk political backlash in Washington if they adhere to the DSA, but noncompliance in Europe could trigger penalties of up to six percent of global revenue.

The dispute shifts compliance from a back-office task to a central factor in corporate strategy.

“Boards are already responding by embedding political risk into contracts, creating redundant cloud architectures, and expanding legal and audit teams,” said Sanchit Vir Gogia, chief analyst and CEO at Greyhound Research. “What was once a routine compliance review has become a standing negotiation between legal, risk, and technology leaders. The operational costs are rising sharply, with compliance headcount and legal fees consuming budgets once earmarked for innovation.”

The approach could also set a precedent. By targeting European regulators, Washington undercuts its own long-standing opposition to extraterritorial law and could encourage countries such as China or India to adopt similar tactics against US officials.

Analysts say the fallout from rising US-EU tensions is already visible, with global projects delayed, duplicate systems built to satisfy political requirements, and reputational risks for firms seen as aligning too closely with Washington.

“Expect higher compliance costs and legal risk from intensified DSA and DMA enforcement in the short term if Trump goes through with this (potential fines under DSA & DMA, plus remediation mandates and audits),” Mittal said. “Prepare for conflicting orders between US measures and EU law, requiring clear escalation paths, local entity decision rights, and scenario playbooks for service continuity.”