The next chapter in the transatlantic tech war.
When a government grants a monopoly in certain industries, it is protecting itself from competition it cannot control. The cost of that decision always falls on the people who depend on services that become more expensive, slower, and less innovative by decree.
This is exactly what the European Commission proposed on June 3, 2026, this time applied to the digital infrastructure that supports hospitals, universities, public administrations, and businesses across Europe. It is called the Cloud and AI Development Act (CADA), and it is the centerpiece of the Tech Sovereignty Package. The logic behind it is protectionist: restrict who can compete, and guarantee market share for alternatives selected by the state.
CADA establishes four European “sovereignty” levels for cloud and artificial intelligence services. At Levels 3 and 4, which apply to healthcare, finance, energy, and public administration, it requires full European control, ownership within the EU, and complete immunity from US law, particularly the US CLOUD Act of 2018, which allows American authorities, with a court order, to compel companies such as Amazon, Microsoft, or Google to hand over customer data regardless of where it is physically stored. The objective is to eliminate this legal possibility for sensitive European data.
AWS, Microsoft Azure, and Google Cloud currently account for roughly 70% of the European cloud market. In practice, CADA excludes them, or makes it extremely difficult for them to participate in the most valuable public sector contracts. To comply with the requirements of the highest sovereignty levels, these companies are effectively forced to create “sovereign clouds,” separate and isolated versions of their global infrastructure with European data centers, exclusively European personnel, and local governance.
These sovereign versions cost between 20% and 30% more than their global equivalents, offer a reduced set of features, and evolve more slowly. Whether the end users are healthcare providers or educational institutions, everyone receives an inferior version of what already exists while paying more for it because the state requires it.
Today, no European provider offers capabilities comparable to AWS SageMaker or Azure ML. CADA does not create such a provider. It merely guarantees public contracts for second-tier alternatives, using taxpayer money to subsidize Europe’s technological lag.
CADA arrives at a moment when transatlantic relations are under unprecedented strain. To understand why, it is necessary to step back. The Digital Markets Act (DMA) and the Digital Services Act (DSA), the European Union’s flagship digital regulations adopted in 2022, impose significant obligations on platforms with substantial market power. They require companies to open their systems to competitors, limit how they promote their own services, and submit to audits and potentially massive fines. In practice, the companies affected are almost exclusively American: Google, Apple, Meta, Amazon, and Microsoft.
No European company is large enough to trigger these obligations. The result is a regulatory framework that, regardless of its stated intentions, functions as a legal competitive disadvantage imposed on US firms. That is why Washington classifies these measures as non-tariff barriers. They make it more expensive and more complicated for American companies to operate in Europe without imposing equivalent burdens on European competitors.
In August 2025, the US administration threatened immediate retaliation unless the EU backed away from enforcing these rules. In December of the same year, the Office of the United States Trade Representative (USTR), the federal agency responsible for US trade policy and international trade negotiations, escalated the dispute with a formal ultimatum, threatening tariffs and restrictions against European companies such as Spotify and DHL unless Brussels changed course.
The AI Act further intensified tensions. Its obligations for general-purpose AI models took effect in August 2025 and fell disproportionately on models developed primarily by American companies, reinforcing Washington’s perception that the EU legislates against foreign competition rather than regulating markets neutrally.
A fragile trade agreement signed in Turnberry, Scotland, in July 2025 reduced tariffs on most European exports to the United States to 15% and temporarily stabilized the relationship. But that balance remains fragile. A finding of unfair trade practices would give the US government legal authority to impose new tariffs on European goods.
At the same time, European small and medium-sized businesses face a different but equally tangible pressure. They depend on affordable and scalable cloud services to compete in global markets, and they are the least able to absorb higher prices, forced data migrations, and the loss of features they have come to rely on. The consequences accumulate quietly: less innovation, slower growth, and reduced ability to compete with American and Asian firms operating without these restrictions.
Technological sovereignty is built by removing barriers to trade, reducing regulatory burdens, attracting global talent and capital, and allowing consumers, not bureaucrats, to decide which technologies best serve their needs. When the state replaces that choice with its own, what is lost is not merely efficiency. What is lost is the principle that markets exist to serve people, not to be managed on their behalf.
