Lawmakers who helped shape the European Union’s landmark AI Act are worried that the 27-member bloc is considering watering down aspects of the AI rules in the face of lobbying from U.S. technology companies and pressure from the Trump administration.

The EU’s AI Act was approved just over a year ago, but its rules for general-purpose AI models like OpenAI’s GPT-4o will only come into effect in August. Ahead of that, the European Commission—which is the EU’s executive arm—has tasked its new AI Office with preparing a code of practice for the big AI companies, spelling out how exactly they will need to comply with the legislation.

But now a group of European lawmakers, who helped to refine the law’s language as it passed through the legislative process, is voicing concern that the AI Office will blunt the impact of the EU AI Act in “dangerous, undemocratic” ways. The leading American AI vendors have amped up their lobbying against parts of the EU AI Act recently, and the lawmakers are also concerned that the Commission may be looking to curry favor with the Trump administration, which has already made it clear it sees the AI Act as anti-innovation and anti-American.

The EU lawmakers say the third draft of the code, which the AI Office published earlier this month, takes obligations that are mandatory under the AI Act and inaccurately presents them as “entirely voluntary.” These obligations include testing models to see how they might allow things like wide-scale discrimination and the spread of disinformation.

In a letter sent Tuesday to European Commission vice president and tech chief Henna Virkkunen, first reported by the Financial Times but published in full for the first time below, current and former lawmakers said making these model tests voluntary could potentially allow AI providers who “adopt more extreme political positions” to warp European elections, restrict freedom of information, and disrupt the EU economy.

“In the current geopolitical situation, it is more important than ever that the EU rises to the challenge and stands strong on fundamental rights and democracy,” they wrote.

Brando Benifei, who was one of the European Parliament’s lead negotiators on the AI Act text and the first signatory on this week’s letter, told Fortune Wednesday that the political climate may have something to do with the watering-down of the code of practice. The second Trump administration is antagonistic toward European tech regulation; Vice President JD Vance warned in a fiery speech at the Paris AI Action Summit in February that “tightening the screws on U.S. tech companies” would be a “terrible mistake” for European countries.

“I think there is pressure coming from the United States, but it would be very naive [to think] that we can make the Trump administration happy by going in this direction, because it would never be enough,” noted Benifei, who currently chairs the European Parliament’s delegation for relations with the U.S.

Benifei said he and other former AI Act negotiators had met with the Commission’s AI Office experts, who are drafting the code of practice, on Tuesday. On the basis of that meeting, he expressed optimism that the offending changes could be rolled back before the code is finalized.

“I think the issues we raised have been considered, and so there is space for improvement,” he said. “We will see that in the next weeks.”

Virkkunen had not provided a response to the letter, nor to Benifei’s comment about U.S. pressure, at the time of publication. However, she has previously insisted that the EU’s tech rules are fairly and consistently applied to companies from any country. Competition Commissioner Teresa Ribera has also maintained that the EU “cannot transact on human rights [or] democracy and values” to placate the U.S.

Shifting obligations

The key part of the AI Act here is Article 55, which places significant obligations on the providers of general-purpose AI models that come with “systemic risk”—a term that the law defines as meaning the model could have a major impact on the EU economy or has “actual or reasonably foreseeable negative effects on public health, safety, public security, fundamental rights, or the society as a whole, that can be propagated at scale.”

The act says that a model can be presumed to have systemic risk if the computational power used in its training “measured in floating point operations [FLOPs] is greater than 10²⁵.” This likely includes many of today’s most powerful AI models, though the European Commission can also designate any general-purpose model as having systemic risk if its scientific advisors recommend doing so.

Under the law, providers of such models have to evaluate them “with a view to identifying and mitigating” any systemic risks. This evaluation has to include adversarial testing—in other words, trying to get the model to do bad things, to figure out what needs to be safeguarded against. They then have to tell the European Commission’s AI Office about the evaluation and what it found.

This is where the third version of the draft code of practice becomes problematic.

The first version of the code was clear that AI companies need to treat large-scale disinformation or misinformation as systemic risks when evaluating their models, because of their threat to democratic values and their potential for election interference. The second version didn’t specifically talk about disinformation or misinformation, but still said that “large-scale manipulation with risks to fundamental rights or democratic values,” such as election interference, was a systemic risk.

Both the first and second versions were also clear that model providers should consider the possibility of large-scale discrimination as a systemic risk.

But the third version only lists risks to democratic processes, and to fundamental European rights such as non-discrimination, as being “for potential consideration in the selection of systemic risks.” The official summary of changes in the third draft maintains that these are “additional risks that providers may choose to assess and mitigate in the future.”

In this week’s letter, the lawmakers who negotiated with the Commission over the final text of the law insisted that “this was never the intention” of the agreement they struck.

“Risks to fundamental rights and democracy are systemic risks that the most impactful AI providers must assess and mitigate,” the letter read. “It is dangerous, undemocratic and creates legal uncertainty to fully reinterpret and narrow down a legal text that co-legislators agreed on, through a Code of Practice.”

This story was originally featured on Fortune.com

• Auto stocks including General Motors and Stellantis tumbled as manufacturers awaited President Trump’s latest tariff announcement on Wednesday. The Dow Jones U.S. auto manufacturers index dropped 5% while Elon Musk’s Tesla was down 5.6%. Industry estimates pegged the price increases as high as $10,000 due to the impact from the levies. 

President Trump pushed ahead with new tariffs on foreign-made cars and light trucks of 25%, he announced from the Oval Office on Wednesday. The new tariffs will launch on April 2 “and we’ll start collecting on April 3,” said Trump, adding the levies would not hit cars built in the U.S. 

“This is going to lead to the construction of a lot of plants, in this case, a lot of auto plants,” said Trump during the press conference. Trump said he expected the tariffs would fuel an increase in auto manufacturing in the U.S. that would push consumer prices down. He also suggested the White House might move ahead with plans to allow consumers to deduct interest payments on auto loans from tax bills if the car is manufactured in the U.S.

“I think our automobile business will flourish like it’s never flourished before,” said Trump. He said “very strong” policing would go along with the 25% auto tariffs. “This is permanent. 100%,” said Trump.

The tariffs were initially set to take effect on March 4, but Trump later announced adjustments on imports from Canada and Mexico to lessen the squeeze on American automotive manufacturers and give them time to prepare. The administration had imposed 25% import levies on goods from Canada and Mexico but allowed the pause for cars and goods traded through the North American USMCA trade agreement. Trump then set a deadline of April 2 for announcing additional reciprocal tariffs and tariffs on cars imported into the U.S., but he reversed course and dropped the tariff announcement a week early. 

The one-month grace period on the 25% tariffs on cars and car parts came after Trump talked to representatives from Ford, General Motors, and Stellantis. Trump also expanded the grace period for other goods from Mexico and Canada. At the time, Trump told companies to “start investing, start moving, shift production here.”

However, experts have said that extending tariffs to auto parts with steel and aluminum will lead to hefty costs for consumers, auto manufacturers and their suppliers. Furthermore, adjusting a manufacturing supply chain often takes years, not weeks, experts have said. Roughly one in five cars and trucks sold in the U.S. were built in Canada or Mexico, the Associated Press reported. In 2024, the U.S. imported $79 billion worth of vehicles from Mexico and $31 billion more from Canada. As for auto parts, $81 billion worth of imports originated in Mexico and $19 billion from Canada. 

“The tariffs announced today will harm — not help — the US auto industry, endanger many American jobs, and lead to a hollowing out of auto manufacturing in the United States,” John Murphy, Senior Vice President at the U.S. Chamber of Commerce, told Fortune. “These auto tariffs come on top of tariffs on steel, aluminum, and goods from Canada and Mexico.  With additional reciprocal tariffs expected on April 2, the stacked tariffs on the auto sector are formidable.”

Ken Kim, a senior economist at KPMG, wrote in a Wednesday note that orders for vehicles and parts had jumped 4% in February, the most significant rise in three years. The rise was due to front running in the auto industry to lock in prices before the tariffs could take effect. Industry estimates pegged the price increase on new vehicles in a range from about $2,000 to $10,000 or more, which would represent a 20% increase on the average transaction price of $48,500, Kim wrote. 

“Consumers are already reeling from elevated inflation,” Kim wrote. “Talk about sticker shock.”

Overall, spending dropped 0.3% in February, the most meaningful decline in seven months, according to Kim, and it’s due to the uncertain economic outlook. 

“The drop could be an early indication that business leaders are pulling back on future capital spending due to the uncertain tariff environment.

According to Scott Lincicome, vice president of general economics at the libertarian think tank Cato Institute, automotive tariffs would not only raise prices on cars, but they would hurt U.S. based automakers. It’s long been acknowledged by auto industry experts that free trade and investment have fueled growth and stability of the auto industry since the 1990s, he wrote. 

“This is why, when Trump threatened new tariffs on automotive goods in 2018, basically every major U.S. business group—the Alliance of Automobile Manufacturers (which includes Detroit automakers), the Association of Global Automakers, the Motor and Equipment Manufacturers Association, the National Association of Manufacturers, the U.S. Chamber of Commerce, and the Business Roundtable—opposed them, as did all the automakers located here.”

This story was originally featured on Fortune.com

• Consumer confidence fell for the fourth consecutive month, and consumers’ outlook on business conditions and their own income fell to the lowest level in 12 years. The Conference Board says confidence has fallen “well below the threshold…that usually signals a recession ahead.”

The Conference Board released its latest Consumer Confidence Survey on Tuesday, which revealed consumer confidence fell for the fourth consecutive month.

Notably, the Conference Board’s Expectations Index—which is based on consumers’ short-term outlook for income, business, and labor market conditions—fell to 65.2, the lowest level in 12 years “and well below the threshold of 80 that usually signals a recession ahead.”

“Consumers’ expectations were especially gloomy, with pessimism about future business conditions deepening and confidence about future employment prospects falling to a 12-year low,” Stephanie Guichard, senior economist of global indicators at the Conference Board, wrote in a statement. “Meanwhile, consumers’ optimism about future income—which had held up quite strongly in the past few months—largely vanished, suggesting worries about the economy and labor market have started to spread into consumers’ assessments of their personal situations.”

Compared to February, fewer consumers in March expected their incomes to increase—and conversely, more people expected their income to actually decrease going forward. Their outlook for the labor market at large also deteriorated, with fewer people expecting more jobs to be available and more people expecting business conditions to worsen.

“Comments on the current administration and its policies, both positive and negative, dominated consumers’ write-in responses on what is affecting their views of the economy,” the Conference Board said. 

March’s big drop in consumer confidence was driven largely by people over 55 years old, followed by those between 35 and 55.

Notably, this pessimism extended to the stock market, where expectations turned negative for the first time since 2023. Markets experienced a massive selloff earlier this month amid tariff uncertainty, which erased all of the S&P 500’s post-election gains.

“In March, only 37.4% expected stock prices to rise over the year ahead—down nearly 10 percentage points from February and 20 percentage points from the high reached in November 2024,” Guichard said. For what it’s worth, what consumers are experiencing appears to match the sentiment on Wall Street, where many economists expecting the Trump administration to pursue “an exceptionally pro-growth agenda” are now feeling distressed amid the heightened risks of a recession.

Consumers are also more worried about inflation than they were in February, remaining particularly “concerned about high prices for key household staples like eggs and the impact of tariffs.” The Commerce Department in February said Americans sharply cut back on spending amid concerns about tariffs’ effects on the economy. On Wednesday, Chicago Fed President Austan Goolsbee warned that inflation will be a self-fulfilling prophecy if businesses start baking consumers’ fears into their own forecasts.

The Conference Board will release its next report on consumer confidence on April 29.

This story was originally featured on Fortune.com