EU, Spain brush off Trump tariff threats over Madrid’s defence spending

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(Changes the day of the week in paragraph 1 to Wednesday (not Monday)

By David Latona and Charlie Devereux

MADRID (Reuters) -The European Commission and Spain’s government on Wednesday dismissed U.S. President Donald Trump’s latest threat to impose higher tariffs on Madrid over its refusal to meet his proposed NATO target for defence spending. 

Trump said he was “very unhappy” with Spain for being the only country to reject the new spending objective of 5% of economic output, adding that he was mulling punishing the Mediterranean country. He had previously suggested making Spain “pay twice as much” in trade talks.

Trade policy falls under Brussels’ remit and the Commission would “respond appropriately, as we always do, to any measures taken against one or more of our member states,” Commission spokesperson Olof Gill said in a press briefing.  

The trade deal between the European Union and the United States signed in July was the right platform to address any issues, Gill added.

WHAT DO SPAIN AND NATO SAY?

“The defence spending debate is not about increasing spending for the sake of increasing it, but about responding to real threats,” Spain’s Economy and Trade Ministry said in a statement. “We’re doing our part to develop the necessary capabilities and contribute to the collective defence of our allies.”    

Spain has more than doubled nominal defence spending from 0.98% of gross domestic product in 2017 to 2% this year, equivalent to about 32.7 billion euros ($38 billion).

Defence Minister Margarita Robles said allies weren’t discussing the 5% target for 2035 in Wednesday’s meeting because they were prioritising the present situation in Ukraine, but wouldn’t completely rule out a shift in Spain’s position.

WHAT COULD WASHINGTON DO?

Targeted tariffs by the U.S. against individual EU member states are rare but there are precedents, Ignacio Garcia Bercero, a senior fellow at the Brussels-based economic think tank Bruegel, said.

In 1999, the U.S. hit the EU with 100% punitive tariffs on products such as chocolate, pork, onions and truffles in retaliation for an EU import ban on hormone-treated beef but excluded Britain, which at the time was still a member of the trade bloc. 

The U.S. could impose anti-dumping penalties on European products that are mostly produced in Spain, said Juan Carlos Martinez Lazaro, professor at Madrid’s IE business school.  

In 2018, Washington imposed a combination of duties of more than 30% on Spanish black table olives at the request of Californian olive growers. Spain’s share of the U.S. market plummeted from 49% in 2017 to 19% in 2024.

Another option would be moving the naval and air bases the U.S. has in southern Spain to Morocco – an idea floated by former Trump official Robert Greenway – which would damage the local economies through the loss of thousands of indirect jobs.

($1 = 0.8605 euros)

(Reporting by David Latona, Charlie Devereux and Charlotte Van Campenhout; Additional reporting by Emma Pinedo and Romolo Tosiani; Editing by Sharon Singleton)