Updates with lawyer's views on legal tool for trade embargo, paragraphs 5-9, details, chart on U.S.-Spain trade, paragraphs 11-14

MADRID/WASHINGTON, July 8 (Reuters) - U.S. President Donald Trump reiterated on Wednesday his desire to impose a trade embargo on Spain, ordering Treasury Secretary Scott Bessent to "cut off all trade ... including visits" with the country, amid tensions over defense spending.

Here is a look at Trump's options to achieve such a move and its implications.

WHAT POWERS DOES A U.S. PRESIDENT HAVE TO IMPOSE A TRADE EMBARGO?

Trade lawyers say that the International Emergency Economic Powers Act (IEEPA) remains available for Trump to impose a trade embargo or economic sanctions against a country despite the U.S. Supreme Court's ruling in February against Trump's use of IEEPA to impose tariffs.

To invoke IEEPA, Trump must declare a national emergency over an "unusual or extraordinary threat" to U.S. national security, foreign policy, or the economy. The law has been widely used to restrict commerce with Iran, Russia and North Korea and to block dollar-based dealings by thousands of companies, individuals and other entities deemed terrorism or national security threats.

Peter Shane, a New York University law professor, said it was "hard to see" how one of 32 NATO countries missing a peacetime defense spending target constitutes such an emergency for the United States.

But the Supreme Court did not pass judgment on the nature of Trump's tariff emergency, leaving his ability to declare a national emergency "undisturbed," said Mayur Patel, a former U.S. Senate Finance Committee Republican trade counsel.

"IEEPA would allow Trump to do an embargo," said Patel, now a trade partner with Hogan Lovells in Washington, even if it is later challenged in court.

HOW MUCH TRADE WOULD AN EMBARGO AFFECT?

Total two-way goods trade topped $47.9 billion in 2025 according to U.S. Census Bureau data. Add in services, including travel, and the total grows to $74.5 billion, according to Commerce Department Bureau of Economic Analysis data, making Spain the 23rd largest overall U.S. trading partner.

The U.S. sells more goods to Spain than it buys, exporting $26.6 billion in goods to the country in 2025 and importing $21.35 billion for a U.S. trade surplus of $5.25 billion.

Top U.S. goods import categories from Spain based on Census Bureau data are pharmaceuticals, electrical transformers and power converters, personal care products, petroleum products, glazed ceramics and olive oil. Top U.S. exports to Spain are pharmaceuticals, crude oil, civilian aircraft and corn.

An embargo also could disrupt bilateral investment. Spanish companies have invested €97.2 billion ($111 billion) in the U.S., making it their largest investment destination worldwide, according to Eurostat data cited by the American Chamber of Commerce in Spain.

The U.S. is Spain's largest foreign investor, with over €116 billion ($132.4 billion) in productive capital investment employing around 200,000 people nationwide.

WHAT OPTIONS ARE THERE BEYOND A FULL EMBARGO?

Patel said that under IEEPA, Trump could impose a selective embargo, as he and his predecessor Joe Biden have done against Russia, allowing in some goods deemed essential. In Russia's case these include enriched uranium, fertilizers and palladium.

Trump has previously exempted aircraft parts from his tariffs, so jet engine turbine components from Spain's ITP Aero used by General Electric GE.N and RTX's RTX.N Pratt & Whitney could be candidates.

Trump also has other tools to impose tariffs or other retaliatory trade measures, including Section 301 of the Trade Act of 1974, an unfair trade practices statute that his administration is now proposing for tariffs related to forced labor on goods from 60 trading partners including the European Union.

In addition, Trump has a Cold War-era trade law, Section 232 of the Trade Expansion Act of 1962, that he can use to impose tariffs or import restrictions on imports to protect certain sectors deemed important to national security.

A complicating factor in any potential trade action against Spain is that the European Union sets trade policy for its member countries and requires common treatment across the bloc. But the U.S. has previously threatened individual EU countries with tariffs over their digital services taxes.

The Commerce Department also could target certain Spanish imports with anti-dumping and anti-subsidy duty investigations. Trump's first administration, at the behest of olive producers in California, imposed a 30% anti-dumping tariff on Spanish black olives under the Tariff Act of 1930, with a separate Commerce investigation ruling that they benefited from unfair subsidies.

The World Trade Organization later ordered a partial rollback but Spain's share of the U.S. black olive market plummeted from 49% in 2017 to 19% in 2024.

HASN'T TRUMP THREATENED SPAIN BEFORE?

Yes. The first threat of trade punishment came in October 2025, when Trump said he "may" punish Spain with tariffs for refusing at a NATO summit in The Hague four months earlier to commit to raising defense spending to 5% of national output.

In March this year he went further, ordering Bessent and Trade Representative Jamieson Greer to begin investigations to embargo all products from Spain. To date, no such investigations have been disclosed on the Federal Register.

HOW MUCH DOES SPAIN CONTRIBUTE TO NATO?

Spanish core defense expenditure is expected to reach €35.41 billion in 2026 ($40.4 billion), equivalent to 2% of its GDP, according to NATO's latest estimates, up from €11.17 billion ($12.8 billion) when Prime Minister Pedro Sanchez took office in 2018.

The country was NATO's seventh-largest defense spender in absolute terms in 2025, according to Spanish government officials citing NATO data.

There are currently nearly 3,000 Spanish personnel deployed to NATO operations abroad, making it the alliance's third-largest contributor of troops abroad in peace and security missions.

It has deployed over 125,000 troops in more than 22 missions, of which more than 100 were killed during NATO operations, Spanish government figures show.

It has mobilised a total of €3.795 billion ($4.3 billion) in support for Ukraine since 2022.

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