The EU AI Act: A Global Game-Changer or a Roadblock for Innovation in the US?

Many of today’s challenges—data privacy, artificial intelligence (AI) governance, and cross-border regulatory enforcement—cannot be tackled by individual nations alone. Instead, these issues demand a coordinated, transnational approach. The European Union’s (EU) Artificial Intelligence Act (AIA) aims to establish a framework for AI governance that prioritizes ethical use and transparency. But what does this mean for the United States, and how will it affect transatlantic tech cooperation? In my article ‘Navigating the Transatlantic AI Landscape,’ I explore the impact of the AIA Act and how the human-centered approach can limit global collaboration and create regulatory gaps between the EU and the US. Balancing risk mitigation with technological progress is essential to sustainable growth.

The AIA is the EU’s bold move toward regulating AI, classifying systems based on their risk levels, and enforcing strict compliance measures. While the EU’s goal is to ensure ethical AI practices, the implications for US tech firms are significant. Companies like Google, Microsoft, and OpenAI may navigate a more complex regulatory landscape affecting everything from market access to innovation strategies.

What’s at Stake for US Firms?

• The impact on US Firms and Innovation—One primary concern is that the AIA might create regulatory barriers, limiting how US companies operate in the European market. The Act imposes rigorous disclosure requirements, potentially forcing businesses to reveal proprietary AI models and methodologies. This could deter investment and slow down innovation, as companies might hesitate to enter a market where compliance costs are high and intellectual property risks are unclear.
• The AI Regulation Tug-of-War—Proponents argue that regulation is necessary to prevent harmful AI applications and protect consumer rights. Critics warn that excessive restrictions could stifle technological advancements, making it harder for EU startups to compete (although there is no empirical evidence that the EU has been an exporter of technological innovation, even before regulations over digital markets). The Act’s risk-based approach—where AI applications are classified from minimal to high risk—has sparked debate over whether it unfairly burdens businesses while failing to distinguish between ethical AI development and misuse.
• The Future of Transatlantic AI Collaboration—The AIA’s extraterritorial reach means that any company offering AI services in the EU must comply with its rules, regardless of location. This could set a precedent for global AI governance, much like the EU’s General Data Protection Regulation (GDPR) did for data privacy. The US and EU have an opportunity to collaborate on AI standards, creating a balanced framework that fosters innovation while ensuring responsible AI deployment.

Striking the Right Balance

The EU’s AI Act is a landmark regulatory effort, but its impact on innovation remains uncertain. While it aims to promote trust and accountability, it also raises concerns about competitiveness and international cooperation. This international cooperation is now more critical than before for two reasons. First, the current US administration is threatening the EU with tariffs as retaliation for excessive burdens on US tech firms. Second, China’s fast escalade in technological infrastructure has positioned it as a dominant force in innovation, which could have stronger repercussions as an importer of a state-driven model in the digital economy. As AI continues to shape the global economy, will the AIA serve as a blueprint for responsible AI governance, or will it create roadblocks that slow down progress? The answer may depend on how regulators, businesses, and innovators navigate this evolving landscape.

Vanessa Villanueva Collao is an Adjunct Professor at Bocconi University and a Visiting Fellow at the European University Institute.

The article is available here.