Donald Trump has threatened to hit Spain with punitive tariffs amid the ongoing defence spending row.
The US president has warned Prime Minister Pedro Sanchez that his country will pay at the border for its refusal to hike defence spending to 5% of GDP, as agreed within NATO this week.
Sanchez has doubled down on his commitment to increase military spending to just 2.1% of GDP, following the NATO summit in The Hague this week – during which he said Trump did not even greet or speak to him.
Trump then threatened to make Spain pay ‘twice as much, reviving fears of a brutal new round of tariffs targeting key Spanish exports.
Speaking today at The Hague, Sanchez said in response: ‘Spain is a supportive country, committed to NATO states, but also sovereign.’
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Referencing the 2.1% he said: ‘That is the balance we agreed upon… We will fulfil our capabilities, and that commitment is absolutely compatible with maintaining the welfare state in Spain.’
He added that ‘Europe and the world have been suffering a trade war with unfair measures.’
He insisted that ‘Spain is an open country and a friend to its friends… we consider the US a friend of Spain.’
Sanchez added that he wanted to focus Thursday’s summit meeting on the ‘catastrophic situation of genocide that is being experienced in Gaza.’
At risk industries
Olive oil, wine, and table olives – flagships of Spain’s agri-food sector – top the list of likely casualties.
Engines, machinery, electrical equipment and pharmaceutical products could also be slapped with tariffs under a renewed protectionist blitz from the White House.
Two industrial sectors are particularly exposed. Semi-manufactured goods – such as aluminum, steel, copper, and chemical products – along with capital goods like machinery and industrial tools, form the backbone of Spain’s exports.
A BBVA Research report reveals that semi-manufactures make up 26.7% of Spain’s total exports, with 1.3% destined for the US Capital goods represent 19.5% of exports, 1.6% of which head stateside.
Any tariff hit here would fall hardest on Valencia, Madrid, and the Basque Country – industrial powerhouses for capital goods – while Catalonia would bear the brunt in chemicals.
Food in the firing line
Beyond industry, it’s Spain’s agricultural producers, particularly in Andalucia and Catalonia, who are bracing for impact.
US-bound food exports valued between €3.5 and €3.8 billion could be at risk. Olive oil leads the charge, accounting for more than a quarter of all Spanish agri-food sales to America. In 2024, those sales surpassed €1 billion.
Wine follows at €335 million, and table olives at €200 million, both long-standing symbols of Spanish culinary culture.
The latter already endured tariff punishment during Trump’s first term, with duties later ruled illegal by the World Trade Organisation in 2021. But by then, the damage was done, and now, the threat looms again.
The Spanish Chamber of Commerce has warned that a sweeping 20% tariff on EU goods, as previously proposed by Trump, could slash Spanish exports to the US by 14% – a staggering €2.5 billion loss.
Steel and aluminium
Steel and aluminum producers are already feeling the burn. In early June, the US doubled tariffs on imports to 50% by executive order, blindsiding Europe’s metals sector.
Spanish industry leaders have warned of cancelled orders and an existential threat to their foothold in the American market.
Previously, companies had been able to cushion the blow of a 25% tariff. But at 50%, margins have collapsed.
As the countdown continues on the NATO defence dispute and its trade fallout, Spanish exporters are preparing for another round of economic whiplash.
