Latest / International Business with Fexingo: Global Trade, Cross-Border Deals, and Multinational Operations / How the Trade War With Spain Is Reshaping European Supply Chains
Transcript
- Lucas: So it's July 8th, 2026, and overnight President Trump announced that the US is cutting off all trade with Spain. No tariffs, no negotiations — just a complete cutoff. Luna: Yeah, I saw the headline this morning. 'I don't want anything to do with Spain — cut off all trade.' That's a pretty dramatic escalation. Lucas: It is. And we're going to unpack what this actually means for companies on both sides of the Atlantic. But first — and I want to tie this to what we're talking about — a quick honest thing. This show, and the whole Fexingo Business network, it's ad-free. No sponsors, no programmatic ads. A small group of listeners chips in monthly through buy me a coffee dot com slash fexingo, and that's literally what funds us making this many episodes. Luna: Yeah, it's a small gesture for a lot of value. And it keeps the conversation honest. Lucas: Absolutely. So back to Spain. The immediate reaction in markets — Spanish stocks took a hit this morning, and the euro dipped slightly against the dollar. But the real impact is going to take weeks to surface. Luna: Right, because a complete trade cutoff is not the same as a tariff. It's an embargo. So what exactly does that cover? Lucas: Everything. Goods, services, probably financial flows. Spain exported about $18 billion worth of goods to the US last year. The big categories are olive oil, wine, auto parts, and pharmaceuticals. And then there's services — tourism, banking, consulting. Luna: Olive oil is a huge one. Spain is the world's largest olive oil producer, and the US is its biggest export market after the EU. That's a multi-billion dollar industry that just lost its largest single-country customer. Lucas: Exactly. And wine — Spanish wine exports to the US were over $400 million last year. That's going to zero overnight. But the auto part story is even bigger. Spain is a major hub for European auto manufacturing — SEAT, which is part of Volkswagen, Renault, Ford has a big plant in Valencia. Those plants export engines and components to the US. Luna: So Ford, a US company, could be disrupted by a US trade policy? That's wild. Lucas: That's the paradox. Ford's Valencia plant makes the Ford Transit Connect, and it exports a lot of those to the US. So now Ford has to either find a new source or shift production. And that takes years. Luna: What about retaliation? The EU is not going to just sit on its hands. Lucas: No, they won't. The EU has a rapid reaction mechanism. They can rebalance tariffs within days. And they've done it before — when Trump put tariffs on steel and aluminum in 2018, the EU retaliated with tariffs on bourbon, motorcycles, and orange juice. This time, they'll aim for politically sensitive US exports. Luna: So what's on the menu? Bourbon again? Harley-Davidson? Lucas: Probably, but also things like pharmaceuticals, aerospace components, and agricultural goods. The EU buys a lot of US soybeans and almonds. And then there's the services side — the EU could target US tech companies, which are already facing regulatory scrutiny. Luna: Let's talk about the numbers. The US trade deficit widened to $77.6 billion in May. That's a big number. Does this move help or hurt that? Lucas: In the short term, it hurts. Cutting off imports from Spain means US companies have to find alternative suppliers, which might be more expensive. That could push the deficit up, not down. And the trade-weighted dollar index has already dipped to 120.7 — a weaker dollar makes US exports cheaper, but it also means imports cost more. Luna: So the administration's stated goal of reducing the trade deficit might actually be undermined by this kind of policy. Lucas: Exactly. And there's a broader signal. This isn't just about Spain. Trump's comments about Greenland, about NATO, about the Iran ceasefire — it's a pattern of unilateralism. Markets are starting to price in a more fragmented global economy. Luna: I saw emerging market ETFs took a hit. EEM, the emerging markets ETF, was down almost 4% in the last five days. And the South Korea ETF, EWY, dropped over 10%. That's not all about Spain, but it reflects a risk-off mood. Lucas: Right. And then there's the impact on specific US companies. We mentioned Ford. But also companies like Procter & Gamble, which imports Spanish olive oil for some of its products. Or Coca-Cola, which imports Spanish wine for its wine-based beverages. There's a lot of hidden exposure. Luna: What about the energy side? Spain is a big importer of US LNG. Does this cutoff affect that? Lucas: It might. The US has become a major LNG exporter, and Spain is one of the top buyers in Europe. If the cutoff includes energy, Spain will have to find other sources — maybe from Algeria or Qatar. That could tighten the global LNG market and push prices up. Oil already surged 6% today on the Iran news, but this adds another layer. Luna: So for a listener who's running a business that sources from Spain, what's the immediate advice? Lucas: First, check your supply chain contracts. Many have force majeure clauses for government actions. Second, start identifying alternative suppliers — maybe in Portugal, Italy, or Greece for olive oil and wine. For auto parts, look at Mexico or Eastern Europe. And third, talk to your customs broker about whether any exemptions exist. The cutoff might not be total — there could be exceptions for humanitarian goods or existing contracts. Luna: And for the Spanish companies listening on the other side — they need to diversify their export markets fast. Latin America, Asia, the Middle East. Lucas: Exactly. This is a forced diversification. And some Spanish companies have been preparing. Banco Santander, for example, has a big presence in Latin America. They're less exposed. But smaller wineries and olive oil cooperatives — they're in trouble. Luna: What about the political timeline? Is there any chance this gets reversed? Lucas: With this administration, it's hard to say. The announcement came without any prior negotiation. But trade policy often gets walked back after lobbying. Big US importers of Spanish goods — like restaurant chains that use Spanish olive oil, or airlines that fly to Spain — they'll lobby hard. And Spain's government will certainly try to open a channel. But for now, it's real. Luna: So this is a big story that's going to unfold over the coming weeks. And it ties into a bigger trend — the weaponization of trade. Lucas: It does. And it's worth watching how other countries react. If the US can cut off Spain with no warning, what's to stop it from doing the same to Germany or Japan? That uncertainty is bad for investment. We're already seeing that in the data — the US trade deficit is widening, and the dollar is weakening. That's not a recipe for stability. Luna: Well, we'll keep tracking it. Thanks as always for listening, and for those who support the show through buy me a coffee dot com slash fexingo — it really helps keep these conversations going. Lucas: Absolutely. We'll be back tomorrow with more.