At the Nato summit in the Netherlands today, Donald Trump fired another volley in the growing row between America and Pedro Sánchez’s Spain. The US President labelled Spain’s refusal to match other European nations in raising defence spending from 2% to 5% of GDP “terrible”, and threatened “we’re going to make them pay twice as much” in reference to prospective trade talks. He added that this exemption was unfair for other Nato members given Spain’s strong economic performance. Yet tariffs alone are unlikely to shift Sánchez’s position. Indeed, the confrontation with Trump may even benefit him as he faces his own problems at home.

If the US proceeds with its warning, picking a fight with Trump would feed into the main narrative sustaining Spain’s governing coalition, of opposition to the “rise of the far-Right”. It would also divert public attention away from the multiple corruption scandals in which Sánchez and his party are currently immersed, as well as winning some national sympathy for “standing up to the Americans”.

What’s more, it wouldn’t be easy for the US to impose tariffs on a single European Union country. Trump could invoke national security issues, as he did with aluminium tariffs earlier this year, but that would demand spending energy and political capital which might not be worth it. Even if tariffs were imposed on Spain, their effectiveness could be limited. Maintaining Spain’s defence spending at the current figure of 2.1% of GDP would cost €9.4 billion between 2026 and 2028. A full increase to 5% of GDP, in line with Trump’s demands, would involve an extra €107 billion in spending.

If the US were to double tariffs on Spanish goods in key sectors such as wine, olive oil, and agri-food and industrial products, the impact would be relatively limited in macroeconomic terms. In 2023, Spanish exports to America totalled approximately €20 billion, representing just 4.9% of the country’s overall exports and around 1.25% of GDP. Doubling tariffs could cost Spain between €1.4 billion at 10% and €3.2 billion at 20%, for instance. An aggressive tariff policy could be painful, but less than increasing defence spending.

Another option might be to link Spain’s military spending to an overall trade deal negotiation with the EU, hoping that other European countries will pressure Sánchez into changing approach. But that would generate a further point of tension with Brussels, given that other EU allies have accepted a hike in military spending.

With an economic model reliant on tourism, public spending, and welfare programmes aimed at securing electoral support, the Spanish PM doesn’t desperately need to boost his country’s industrial capacity. Meanwhile, his base and governing coalition remain instinctively suspicious of both Nato and the US, and Spain’s previous involvement in the alliance has historically been lower than other European powers. In recent discussions around continental defence spending, Sánchez even contributed to watering down the name of the European Commission’s strategic initiative from Rearm Europe to Readiness 2030, as well as broadening the definition of what constitutes defence spending.

If the dispute between the US and Spain escalates, it is likely that Sánchez will use this issue to extract further concessions from other EU countries before changing his position. Trump’s fury in the Netherlands has given the PM an opportunity to shore up his own position. Sánchez might just get away with it.

---

Miquel Vila is a political consultant specialising in international affairs. He is also the executive director of the Catalonia Global Institute.

miquelvilam

---