Trump urges cutoff of trade with Spain in NATO spending dispute
The U.S. president criticized Spain at a NATO summit, adding pressure to Spanish bonds and equities already trading lower.
By Amanda Ross · Deals Correspondent
· 2 min read
President Donald Trump called for a cutoff of trade with Spain after accusing the country of failing to contribute enough to NATO, CNBC reported. Spanish assets weakened after the remarks, with the 10-year government bond yield last up 7 basis points at 3.5408% and the IBEX 35 equity index down more than 1%.
Trump made the comments at a press conference in Ankara alongside NATO Secretary General Mark Rutte during the alliance’s summit in Turkey, according to CNBC. “Spain is a terrible partner in NATO. They don’t participate. They don’t pay. I don’t want anything to do with Spain. Cut off all trade with Spain, please, including visits,” Trump said.
The president also said: “Don’t even talk to them. They’re hopeless, bad people.” CNBC described the remarks as the latest escalation in Trump’s dispute with Spain over defense spending.
Defense spending dispute
Spain is the only NATO member that did not commit last year to spending 5% of gross domestic product on defense by 2035, CNBC reported. Trump has repeatedly pressed NATO allies to increase military expenditure, and his comments in Ankara put Spain at the center of that burden-sharing argument.
The defense-spending target is expressed as a share of GDP, meaning the required nominal budget rises or falls with the size of an economy. For governments, the ratio can become a fiscal question as well as a security pledge, because higher defense allocations may compete with other public spending priorities unless offset by revenue or borrowing decisions.
Market reaction
CNBC reported that Spanish government bonds had already been under pressure before the press conference and fell further after Trump spoke. Bond prices and yields move in opposite directions, so the reported rise in the 10-year yield indicates investors demanded a higher return to hold the benchmark debt.
The move in Spanish equities also extended the market reaction. The IBEX 35, Spain’s main stock index, was last seen trading more than 1% lower, according to CNBC. The report did not specify which sectors led the decline.
Trump’s statement did not include operational details on how a trade cutoff would be carried out. The reported remarks nonetheless added a trade dimension to a defense-spending disagreement inside the alliance, linking NATO budget commitments with economic ties between the United States and Spain.
No response from the Spanish government was included in CNBC’s report. The developments came as NATO leaders met in Turkey, with Rutte present for the press conference at which Trump made the comments.
This story draws on original reporting from CNBC.
