President Donald Trump issued a warning on Wednesday, suggesting that the U.S. may stop all trade with Spain. This statement came after Madrid’s reluctance to boost military spending and the airspace limitations that were implemented following an American assault on Iran.
He cautioned NATO allies in Europe against manipulating figures concerning defense expenditures, stressing the importance of having a straightforward strategy to meet the designated spending goals—rather than just counting non-military expenses.
Though NATO members aim to hit a 2% defense spending benchmark by 2025, NATO Secretary General Mark Rutte backs Trump’s claim that all allies should aim for a 5% GDP increase by 2030. However, Spain seems rather distant from this target; Socialist Prime Minister Pedro Sánchez has maintained that he will not exceed 2.1% of GDP for defense.
In light of Trump’s trade threat, Sánchez’s office emphasized that Spain values its social, cultural, and economic ties with the U.S. and has no intention of altering that relationship.
Implementing a total trade halt could be complicated. Such a move would limit the availability of everyday items, like olive oil, for Americans and could disrupt existing agreements with the European Union.
President Trump: ‘Spain is a futile cause’
During his statements, Trump called Spain “a wasted cause,” announcing that the U.S. would not pursue any more trade agreements with the country. He also noted that he had instructed Treasury Secretary Scott Bessent to consider halting trade for the second time within the year.
“Spain is a terrible NATO partner. They don’t pay their share. I want nothing to do with Spain. Cut off all trade, including visits… Just watch them back off,” Trump stated.
He added, “We don’t have to engage with them. Right now, we don’t want to deal with them.” He suggested that if Spain were to reach out asking to continue relations, it might be more favorable.
Despite Trump’s assertions, he remarked that Spain benefits significantly from its trade with the U.S., and many would notice a downturn in their earnings without American business.
The cost of trade reduction: olive oil imports
The trade volume between the United States and Spain stands at about $47 billion yearly. While the U.S. sends energy products, machinery, and pharmaceuticals to Spain, it imports a variety of goods in return.
Some common imports from Spain are medicines, oils, specialty foods, wine, and electronics. Though U.S. imports from Spain have dipped by around $2 billion since the beginning of Trump’s second term, the U.S. still purchases substantial quantities of Spanish products.
Spain exports a small percentage of its goods to the U.S., with only 4.9% of its exports and 1.2% of total American exports going the other way. Notably, approximately 18% of Spain’s imports consist of food, particularly fats and oils.
As the leading global supplier of olive oil, Spain accounts for nearly half of the world’s production. Importing around 90 million kilograms annually, the value comes to over $860 million.
If the U.S. were to officially cease trading with Spain, it would dramatically affect the availability of olive oil in grocery stores, as many products either come directly from Spain or utilize Spanish oils.
Such a situation could lead to price hikes for olive oil and other goods, given that the U.S. produces under 2% of its own olive oil and relies heavily on imports from other nations.
Prices may soar due to the current production limits, creating potential shortages which could prompt retailers and restaurants to rethink their pricing structures.
Ending trade completely is not as easy as you think.
At a NATO press conference, Trump was questioned about European trade relations and whether he intended to decrease dealings with Spain. His response indicated frustration with the EU, suggesting they’ve long taken advantage of the U.S.
Due to the trade arrangements with the EU, Spain’s foreign trade operates under group agreements, complicating the process of individually targeting one country. Changes Trump might propose could jeopardize this larger deal.
How can President Trump retaliate against Spain?
Under the International Emergency Economic Powers Act, Trump holds the authority to limit or block foreign economic transactions if there is proof that a country poses a significant threat to U.S. interests. However, proving such a threat is no simple task.
This legislation has been historically applied to nations like Iran and Syria in the past. Trump might consider less extreme measures than an outright embargo; he could impose tariffs based on national security concerns if deemed necessary.
During his first presidency, Trump’s administration implemented “anti-dumping rules” on Spanish olives, leading to a plummet in Spain’s market share of black olives in the U.S.
As he reiterated the idea of punitive action against Spain for its defense spending, it’s noteworthy that trade between the countries has remained stable despite his previous threats. Sánchez’s office regarded Trump’s comments as routine, maintaining the importance of good relations with the U.S.
