Economic Warfare – US V Spain

Trade has increasingly become the weapon of choice for politicians who cannot resolve disputes through diplomacy. Now we see tensions erupting between the United States and Spain after Madrid refused to allow American forces to use joint bases for operations related to Iran. Washington responded by threatening to cut off trade entirely with Spain. This type of reaction illustrates the dangerous trend that I have warned about for years where politicians increasingly treat trade as a geopolitical weapon.

Spanish Prime Minister Pedro Sánchez publicly condemned Israel and the US for “playing Russian roulette with millions of lives” and called the strikes “unjustifiable.” “Spain has absolutely nothing that we need,” President Trump responded, noting he told the Treasury Secretary to “cut off all dealings with Spain.”

Trade was originally intended to bind nations together economically so that war became less attractive. Adam Smith understood this centuries ago. When nations rely upon each other economically, they have a strong incentive to maintain peace. The moment governments begin using trade as a punishment tool, the entire framework collapses. We saw this repeatedly in the 20th century when sanctions and trade barriers escalated conflicts rather than resolving them. History shows that once trade becomes weaponized, it rarely stops with a single country.

Spain’s refusal to allow its bases to be used reflects Europe’s growing discomfort with the escalation of conflicts abroad. Yet responding with threats to sever trade does nothing to solve the dispute. Instead, it drags the entire European Union into the matter since Spain cannot be isolated from the EU’s trade system.

Trade is tied directly to capital flows. When capital moves into the United States seeking safety or investment opportunities, the trade deficit expands automatically as a balancing mechanism. Attempting to manipulate trade through threats or sanctions does not change the underlying economic forces driving capital movement around the world.

Weaponizing trade also accelerates fragmentation in the global economy. Nations begin forming blocs, bypassing one another with alternative financial systems, payment networks, and supply chains. We have already seen this process unfolding as countries search for ways to avoid sanctions and political interference in commerce. The more trade is politicized, the faster this fragmentation accelerates.

What we are witnessing is not simply a dispute between Washington and Madrid. It is part of a broader shift where governments are increasingly willing to use economic systems as tools of coercion. The problem is that once this door is opened, every nation eventually adopts the same strategy.