Economy

European Union Braces for Trade Showdown: How Trump’s Tariff Threats Could Backfire on Spain

Trump threatened Spain with tariffs over NATO spending; EU vows response.

October 15, 2025, 12:36 PM

Spanish Prime Minister Pedro Sánchez gestures while speaking outdoors at the Élysée Palace, with military guards in the blurred background.

The Prime Minister of Spain, Pedro Sánchez, speaks outside the Élysée Palace in Paris. By Victor Velter / Shutterstock.com.

Executive Summary

President Trump threatened higher tariffs on Spain, citing its refusal to commit to his proposed 5% NATO defence spending target.

The European Commission dismissed Trump’s threat, asserting its exclusive authority over EU trade policy and pledging an “appropriate” response to any U.S. measures against member states.

Spain clarified its defence spending focus on “real threats” and not just expenditure, with potential U.S. retaliation measures including tariffs on Spanish products or the relocation of U.S. military bases.

The Story So Far

President Trump’s threat of higher tariffs on Spain stems from his dissatisfaction with Madrid’s refusal to commit to his proposed 5% NATO defense spending target, despite Spain having significantly increased its defence budget to 2% of GDP. This situation is further complicated by the European Commission’s assertion of its exclusive authority over EU trade policy, indicating that any U.S. measures against Spain would be met with a collective EU response, thereby highlighting ongoing transatlantic tensions regarding defense burden-sharing and trade relations.

Why This Matters

President Trump’s threat of higher tariffs on Spain, stemming from its refusal to commit to a 5% NATO defence spending target, signals a potential escalation of transatlantic trade tensions, with the European Commission asserting its exclusive trade authority and pledging a robust response. This dispute could lead to significant economic repercussions for Spain, including targeted anti-dumping penalties on key exports or even the relocation of U.S. military bases, which would impact local economies and underscore persistent disagreements over NATO burden-sharing.

Who Thinks What?

President Trump is “very unhappy” with Spain’s refusal to commit to his administration’s 5% NATO defence spending target and is considering imposing higher tariffs on Madrid.

The European Commission asserts that trade policy falls under its exclusive jurisdiction and pledges to “respond appropriately” to any U.S. measures taken against EU member states.

Spain’s Economy and Trade Ministry believes defence spending should focus on responding to “real threats” and developing necessary capabilities, emphasizing its significant increase in defence spending and contribution to collective defence, while not committing to the 5% target.

The European Commission and Spain’s government on Wednesday dismissed a recent threat by U.S. President Donald Trump to impose higher tariffs on Madrid. Trump expressed dissatisfaction with Spain’s refusal to commit to his proposed 5% NATO defence spending target, prompting Brussels to affirm its sole authority over EU trade policy and pledge an “appropriate” response to any U.S. measures.

Trump’s Stance on Defence Spending

President Trump stated he was “very unhappy” with Spain, highlighting it as the sole nation to reject his administration’s new defence spending objective of 5% of economic output. He indicated he was considering punitive measures, having previously suggested Spain “pay twice as much” in trade negotiations.

EU and Spain’s Response

Olof Gill, a spokesperson for the European Commission, reiterated that trade policy falls under Brussels’ exclusive jurisdiction. Gill affirmed the Commission’s commitment to “respond appropriately” to any actions taken against EU member states, referencing the trade deal signed between the European Union and the United States in July as the appropriate framework for addressing such issues.

Spain’s Economy and Trade Ministry issued a statement clarifying that the defence spending debate should focus on responding to “real threats,” rather than simply increasing expenditure. The ministry emphasized Spain’s efforts to develop necessary capabilities and contribute to collective defence.

Spain has significantly increased its nominal defence spending, moving from 0.98% of gross domestic product in 2017 to 2% this year, totaling approximately 32.7 billion euros. Defence Minister Margarita Robles noted that allies were not discussing the 5% target for 2035 during Wednesday’s meeting, prioritizing the current situation in Ukraine, but did not entirely rule out a future shift in Spain’s position.

Potential U.S. Retaliation Measures

While targeted tariffs by the U.S. against individual EU member states are uncommon, precedents exist for such measures. Ignacio Garcia Bercero, a senior fellow at the Brussels-based economic think tank Bruegel, cited the 1999 U.S. punitive tariffs on certain EU products in response to an import ban on hormone-treated beef, which notably excluded Britain.

Juan Carlos Martinez Lazaro, a professor at Madrid’s IE business school, suggested the U.S. could impose anti-dumping penalties on European products predominantly produced in Spain. He highlighted a 2018 instance where Washington levied duties exceeding 30% on Spanish black table olives, leading to a significant drop in Spain’s share of the U.S. market from 49% in 2017 to 19% in 2024.

Another potential action discussed includes relocating the U.S. naval and air bases currently situated in southern Spain to Morocco. This idea, previously floated by former Trump official Robert Greenway, could severely impact local Spanish economies through the loss of thousands of indirect jobs.

Outlook

The escalating rhetoric underscores the ongoing transatlantic tensions regarding defence burden-sharing within NATO and the intricate dynamics of EU-U.S. trade relations. Both sides appear prepared to defend their positions, with Brussels asserting its trade authority and Spain defending its defence spending trajectory amidst global security concerns.