The Situation Room - March 4th

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I’m Atlas, and welcome to The Situation Room! We cover the most high impact geopolitical developments every Wednesday!

Today’s topics:

• Spain Splits Over U.S. Strikes, Trump Threatens Trade Cutoff

• Analysis: China Offers Little More Than Moral Support To Iran Following Strikes

• India And Canada Make Landmark Agreement

Spain Splits Over U.S. Strikes, Trump Threatens Trade Cutoff

_{By: Atlas}

The joint U.S.-Israeli military campaign against Iran opened a new front in transatlantic relations Tuesday, as President Trump threatened to sever all trade ties with Spain following Madrid's refusal to allow American forces to use jointly operated military bases on Spanish soil. The confrontation, which unfolded publicly during Trump's Oval Office meeting with German Chancellor Friedrich Merz, added a bilateral economic dimension to what is already the most significant U.S. military operation in the Middle East in years.

Spain's position placed it at direct odds with Washington at a moment when most of Europe, whatever its reservations about the legality of the strikes, was careful to avoid a direct clash with the Trump administration. Prime Minister Pedro Sánchez, one of the last prominent left-leaning leaders in Europe, had condemned the U.S.-Israeli strikes on Iran as an "unjustifiable, dangerous military intervention" in violation of international law. His government then followed words with action, instructing officials to deny any use of American-accessible bases in southern Spain in connection with operations against Iran.

Spain's Decision and the Legal Basis Behind It

The refusal was not ad hoc. Spanish Foreign Minister José Manuel Albares made Madrid's position explicit on Sunday: "Spanish bases are not being used for this operation, and they will not be used for anything not included in the agreement with the United States or for anything that is not in accordance with the Charter of the United Nations."

The United States maintains access to two key installations in Spain — Naval Station Rota and Morón Air Base — under a long-standing bilateral defense cooperation agreement. Under the terms of that arrangement, Spain retains sovereignty over the bases, and any use beyond the scope of the existing agreement requires Madrid's explicit authorization. Combat operations or offensive strikes launched from Spanish territory fall into that category. After Spain made its position clear, the U.S. relocated 15 aircraft, including refueling tankers, from the two bases.

Sánchez framed the decision in terms of international law and regional stability. "We reject the unilateral military action by the United States and Israel, which represents an escalation and contributes to a more uncertain and hostile international order," he wrote on X. "We cannot afford another prolonged and devastating war in the Middle East."

Trump's Response and the Trade Threat

The reaction from Washington came Tuesday, during Trump's bilateral meeting with Merz. Trump, who spent several minutes during the session expressing frustration with European allies over Iran, directed his sharpest comments at Spain.

"Spain has been terrible," Trump told reporters in the Oval Office. "In fact, I told Scott [Bessent] to cut off all dealings with Spain."

He did not stop there. "We're going to cut off all trade with Spain. We don't want anything to do with Spain," he said, adding that he considered Spain's stance "unfriendly" and its leadership deficient. He also returned to a longstanding grievance: Spain is the only NATO member that declined to agree to the alliance's 5 percent of GDP defense spending target. "They wanted to keep it at 2% and they don't pay the 2%," Trump said.

Trump claimed broad executive authority to move forward, telling reporters: "All business having to do with Spain — I have the right to stop it. Embargoes — do anything I want with it." He turned directly to Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer, who were present in the room, asking for their assessments. Bessent said the Supreme Court had reaffirmed the president's ability to implement an embargo and that the USTR and Commerce Department would begin the necessary investigations. Greer was more measured, saying only: "We're going to talk about it with you. We know you can use it, and if you need to use it to assure national and economic security, we'll do it."

The Legal and Structural Obstacles

Whether Trump can actually impose a full trade embargo on Spain as a standalone action is far from settled. The European Union negotiates trade agreements on behalf of all 27 member states as a bloc, which means any U.S. attempt to target Spain individually runs directly into the existing EU-U.S. trade framework. Merz addressed this point bluntly after his meeting with Trump: "I said that Spain is a member of the European Union and we negotiate about tariffs with the United States only together or not at all. There is no way to treat Spain particularly badly."

The European Commission reiterated that position. "The Commission will always ensure that the interests of the European Union are fully protected," a Commission spokesperson said.

Legal scholars raised additional hurdles. Jennifer Hillman, a trade law professor at Georgetown University, said the Supreme Court's recent ruling did not specifically address the president's authority to impose a trade embargo under the International Emergency Economic Powers Act. While Trump could theoretically do so, he would have to formally declare Spain an "unusual and extraordinary" threat to the United States — a designation that, Hillman noted, would go well beyond any prior emergency declaration. Peter Shane, an adjunct law professor at New York University, put it more directly: "It's hard to see how Spain denying us the use of air bases on its territory for us to launch an attack on Iran poses 'an unusual and extraordinary threat' to our national security or foreign policy."

Total goods trade between the U.S. and Spain reached roughly $47 billion in 2025, according to U.S. Census Bureau data. The U.S. ran a trade surplus with Spain of approximately $4.8 billion that year, with U.S. exports of $26.1 billion and imports of $21.3 billion. Spain's top exports to the United States include pharmaceutical products, olive oil, auto parts, steel, and chemicals. Spain's government said Tuesday that it has the resources to absorb the impact of any trade embargo and will continue to push for free trade and economic cooperation with its partners.

The UK and the Broader Strain With European Allies

Spain was not the only NATO ally to draw Trump's criticism Tuesday. The president also trained his frustration on British Prime Minister Keir Starmer, who had denied Washington the use of Diego Garcia — a strategically significant base in the Indian Ocean — for the initial wave of strikes on Iran. Starmer later amended that position to allow limited use of the base specifically for missions targeting Iran's missile capabilities, but his earlier refusal drew a direct rebuke from Trump.

"This is not Winston Churchill we are dealing with," Trump said. He called the U.K. "very, very uncooperative" and criticized Starmer's government separately for agreeing to transfer control of the Chagos Islands — home to the Diego Garcia base — to Mauritius.

Starmer addressed Parliament on Monday and defended his position without equivocation: "This government does not believe in regime change from the skies. It is my duty to judge what is in Britain's national interest. That is what I have done. And I stand by it."

The strain marks a notable shift in Anglo-American relations. Lew Lukens, a senior partner at Signum Global Advisors and former acting U.S. ambassador in London, described the relationship as being at its lowest point in recent memory. "Probably have to go back to when Reagan invaded Grenada without giving Thatcher a heads up," Lukens said, while also expressing doubt that Trump would ultimately follow through on economic retaliation against the UK. "At the end of the day, the US needs UK defense cooperation and intelligence support as it carries out its strikes against Iran," he noted.

Germany's Merz, by contrast, emerged from the meeting in a notably different position. Trump singled out Germany as having "been great" in its response to the Iran operation — a reversal from earlier tensions earlier in his second term and a reflection of Merz's more accommodating posture toward the administration. Merz agreed with Trump that Spain needed to raise its defense spending to comply with NATO commitments, while making clear that any trade measures against Madrid would have to navigate the EU's collective trade framework.

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