Trump Threatens Spain With US Trade Embargo Over Military Base Access

Liana Fix, Senior Europe Fellow at the Council on Foreign Relations, discusses European criticism of the conflict in Iran and US actions in the Middle East.

President Donald Trump said the US is going to “cut off all trade with Spain.”

On Tuesday he lashed out at the 23rd-largest source of American imports after the country denied access to its military bases for his bombing campaign against Iran. In response, Spain’s government issued a sharp rebuke saying he must respect international trade agreements.

Trump didn’t explain how he planned to follow through, which could prove particularly difficult since the US has a trading relationship with the broader European Union. Later, he suggested he had the power to impose a full embargo on goods from the country.

The threat sent Spanish equities to the lowest in almost three months, the worst-performing country index among major European markets today.

Deborah Elms, head of trade policy at the Hinrich Foundation in Singapore, said that even though the Supreme Court struck down Trump’s use of IEEPA authority to impose tariffs, “other trade restrictions are possible.”

“A court defeat is not going to stop Trump from using trade and trade threats as a weapon for a dizzying array of issues,” she wrote in a LinkedIn post.

Meanwhile, Spanish Prime Minister Pedro Sánchez said he won’t yield to threats over his objections to the US and Israeli war in Iran.

“We are not going to be complicit in something that is harmful to the world and contrary to our values and interests simply out of fear of someone’s retaliation,” Sánchez said in a speech Wednesday.

In an interview with Bloomberg’s Dani Burger, Banco Santander Executive Chair Ana Botin played down the latest transatlantic rift.  Spanish Prime Minister Pedro Sánchez said he won’t yield to threats over his objections to the US and Israeli war in Iran, extending a dispute with President Donald Trump, who threatened to cut off trade with the Mediterranean country.

“We are not going to be complicit in something that is harmful to the world and contrary to our values and interests simply out of fear of someone’s retaliation,” Sánchez said in a speech Wednesday.

Trump on Tuesday said the US would “cut off all trade with Spain,” criticizing the country for denying access to its military bases for the American bombing campaign against Iran.

Spain’s main equities benchmark Ibex 35 traded higher as of 12:26 p.m. in Madrid, as European markets rebounded. Spanish bonds also edged higher, showing no sign of impact from the threat. Trump didn’t explain how he planned to cut off trade with Spain, which could prove difficult since the US has a trading relationship with the broader European Union. Later, he suggested he had the power to impose a full embargo on goods from the country, though didn’t indicate explicitly that he planned to do so.

The European Commission, which handles trade matters for the EU, said it would stand with Spain.

“Any threat against a member state is by definition a threat against the EU,” EU industry chief Stéphane Séjourné said at a press conference in Brussels. “If you threaten one particular country, we’ve seen that about Greenland, I think we saw that there was a lot of unity.”

French President Emmanuel Macron also backed Spain in a call with Sánchez, an Élysée spokesperson said. Macron conveyed France’s “solidarity in response to the recent threats of economic coercion, of which Spain was the target yesterday.”

Sánchez also welcomed messages of support from European Commission President Ursula von der Leyen and European Council President António Costa, who chairs meetings of EU leaders.

Referring to the conflict in Iran, Sánchez said the government is considering an aid package to Spanish businesses and workers in order to “mitigate the economic impacts of this conflict.” Spain runs a €13.4 billion ($15.6 billion) trade deficit with the US. Total bilateral trade amounts to €46.8 billion. On Sunday, Sánchez said the US and Israeli operation amounted to an “unjustified, dangerous military intervention outside international law.”

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