Spain treads a risky path by standing up to Trump on defense and China

CNBC

2 days ago

Spain's somewhat unique approach to defense and foreign policy is fueling tensions with the Trump administration.
The Spanish government recently renounced U.S. aircraft purchases and resisted intense pressure to commit to NATO's new 5% defense spending target, while seeking closer economic ties with China.
Taken together, analysts say Spain has become a rare example of a European country willing to draw the ire of U.S. President Donald Trump.
Notably, despite Trump threatening a tough trade deal for Spain, the southern European country has not yet faced any material consequences.
"Spain is an interesting case in Europe because it is really the only country that is openly antagonizing Trump whereas everybody is trying to keep their head down for the most part," Federico Santi, a senior analyst focused on southern Europe at Eurasia Group, told CNBC by video call.
What's particular to Spain, Santi said, was the "distinct weakness" of the country's minority leftist coalition government, which has been embroiled in a series of scandals and corruption investigations.
Spanish Prime Minister Pedro Sanchez, who has led the country since 2018, has rebuffed calls from opposition lawmakers to resign. The leader of the Spanish Socialist Workers' Party has instead said he intends to run for re-election in 2027.
The opportunity to focus on big-ticket foreign policy issues such as defense, Eurasia Group's Santi said, could help Sanchez to distract the public from his own domestic woes.
"Spain has, by and large, gotten away with its fairly outspoken criticism of Trump for two main reasons. Number one, it is in the EU. So, unlike the South Africa's or Brazil's of the world that faced a very direct backlash from Trump in the form of higher tariffs, they are somewhat shielded from that," Santi said.
"And the other point I think that works to Sanchez's advantage is that Trump just doesn't seem to be that concerned or aware of Spain as a country. I mean, he's aware of it, but it is not really on his radar," he added.
A spokesperson for Spain's government did not respond to a CNBC request for comment.
Spain's defense ministry said last week that it was no longer considering the option of buying U.S.-made F-35s, Reuters reported, preferring instead to replace its ageing fighter jet fleet with European military aircraft.
The decision to snub Lockheed Martin's fighter jets came after Trump said it was "terrible" that Madrid wouldn't commit to the NATO defense spending target of 5% of gross domestic product by 2035.
Speaking at a news conference at NATO's annual summit in the Netherlands in late June, Trump said the Spanish economy "could be blown right out of the water with something bad happening."
The U.S. president also threatened to make Spain pay "twice as much" on trade, criticizing Madrid for wanting to take "a little bit of a free ride" on defense.
The U.S. and EU, however, have since signed a framework trade agreement that means the 27-nation bloc will face tariffs of 15% on EU goods to the U.S. The EU negotiates trade deals collectively, which means Spain benefits from the collective bargain struck by Brussels.
In stark contrast, Switzerland, which is not a member of the EU, has been hit hard by a U.S. tariff rate of 39% on key export products.
Ignacio Molina, senior fellow at the Elcano Royal Institute, a think tank in Madrid, said Spain's geographic distance from Russia and the distinct features of its foreign policy stretching back to its last war in 1898, which was against the U.S., means that Madrid views its relationship with Washington as "less vital" than other EU countries.
"The dominant political culture in Spain is much more pro-European than Atlanticist. Even with regard to Ukraine (whom Spain strongly supports) Spain's main focus is on its EU accession bid and the reception of refugees, not on its NATO membership or arms deliveries," Molina told CNBC by email.
Molina highlighted that Spain-U.S. relations are further complicated by the fact that the Spanish government is the "most ideologically left-leaning" in all of Europe.
"This introduces a domestic political temptation to distance itself from Trump, who is extremely unpopular in Spain, including among center-right voters," Molina said.
A diplomatic rift between Spain and the U.S. has also been exacerbated by Madrid's pursuit of closer economic ties with Beijing.
The U.S. has two military bases in southern Spain, a country that has emerged as one of Europe's most China-friendly governments.
Both U.S. and EU officials have recently been critical of Sanchez's decision to award a multi-million-euro contract to Chinese tech giant Huawei for the use of its wiretapping technology.
Kristina Kausch, senior fellow at the German Marshall Fund of the U.S., and the think tank's representative in Madrid, said Spain's deepening ties with China had raised eyebrows in the U.S. and parts of Europe.
"While this echoes a broader desire in Europe for strategic rebalancing, EU leaders have stressed that such a rebalancing must be based in reciprocity," Kausch said.
By resisting U.S. purchasing pressure on defense, Kausch told CNBC that Spain has demonstrated Europe's determination to independently develop military capabilities and industrial capacity.
Even with the cover of EU membership, however, Kausch said the approach is not likely to be risk-free.
"Spain is giving a voice to concerns that are also shared, to greater or lesser degree, by other EU or NATO allies. It shows leadership, but it is also a big gamble that could backfire on Sanchez personally, on Spain, and on Europe," she added.