The new US administration has burst onto the scene, shaking up global geopolitics and setting in motion a series of decisions that are not only reshaping the present, but will define the coming decades.
From the escalating trade war with China to the uncertainty surrounding NATO, the European Union’s (EU) rearmament, and renewed tariffs in North America, each falling piece alters the global balance and sets off the next. The geopolitics of multilateralism of recent decades is faltering, and its final throes are shaping the outlines of a new global context.
Keeping track of these changes on a daily basis has not been easy, so let’s take this opportunity to gather headlines and analyze this domino effect: let’s see which pieces have fallen, which are about to fall, and how the board will look for Spain and Spanish companies.
1. Tariffs in China, the anticipated queen's gambit
In chess, a gambit is an opening in which a piece is sacrificed to gain a long-term advantage. This is an illustrative analogy, as it highlights that the new administration’s imposition of tariffs on China is having (and will have) a cost.
While these tariffs primarily affect China’s trade balance, they also pose an economic and political risk to the US. The US stock market plummeted after the announcement, dragging down Western markets, while Shanghai and Hong Kong remained stable and even registered slight growth. The tariffs could have a significant impact on sectors strategic to the US, and we will not be able to fully grasp their effect for months or even years.
China, for its part, was already forced to diversify its trade relations during the first Trump administration to mitigate the impact of tariffs. It maintains a trade surplus and, since then, has continued to expand its influence in Asia, Africa, and Europe, reducing its dependence on the US market.
Rather than focusing on a war of attrition, Beijing could choose to compete for geopolitical influence, taking advantage of US friction with other actors.
2. Mexico and Canada, two new pieces to fall
While a trade war with China was anticipated, the real game-changer has been the declaration of a tariff war against the US’s long-standing trading partners, affecting NATO and EU countries, with a particularly immediate impact on Mexico and Canada. The announcement of 25% tariffs on most imports from these two countries is, above all, a stark declaration of intent to the West.
Canada has already responded with its own tariffs on US goods, triggering renewed tariff tensions between both countries.
Mexico, on the other hand, has opted to buy time: it has delayed the implementation of its countermeasures by a month and appears to be focusing on stimulating its domestic economy.
These measures taken at the beginning of this legislative session must be interpreted politically, not just economically. The trade conflict with the US’s traditional trading partners has created a strategic vacuum that, in the context of international geopolitics, is never slow to be filled. The EU, in particular, has spearheaded the most significant shift.
3. The European Union accelerates its bet on militarization
The announcement of 25% tariffs on steel and aluminum has deepened the trade rift between the US and the EU. In response, Europe will impose tariffs on a wide range of products, from Harley-Davidson motorcycles and bourbon whiskey to agricultural products and even boats: itemized goods or products manufactured in key states for Trump.
These tensions are compounded by Washington’s criticism of its allies on defense matters. NATO remains too valuable an asset for the US to sacrifice, but for European countries, it has served as a wake-up call regarding their strategic dependence.
In response, and in line with a pre-existing trend of making security investment a cornerstone of its strategy, the EU has announced an €800 billion investment in defense, marking a shift in its geopolitical approach for the coming decades. To put this figure into perspective, the Next Generation EU funds, earmarked for Europe’s recovery from the COVID-19 crisis, amounted to only €750 billion.
The key? The same dynamics that are creating a divide with the US will also blur the lines of Europe’s strategic alliances. European countries will rethink their alliances, making a rapprochement with new partners more than likely. This is where Spain can play a key role, and where we should be focusing our attention.
Conclusions: How can Spain play while the board is being assembled?
To recap, the tariff strategy of the new US administration has accelerated a series of changes that go beyond trade, with the consequent chain reaction:
- The US is increasing tariff pressure on China, reinforcing a strategy to curb its economic development that could prove enormously costly.
- The tariffs extend to Mexico, Canada and the EU, in a declaration of intent that forces several long-standing trading partners to respond with their own measures.
- Faced with the erosion of these relationships and the uncertainty surrounding NATO, the European Union is accelerating its investment in defense, with an uncertain future regarding its degree of autonomy.
The impact is amplified in Spanish sectors most exposed to these changes—such as steel, hit by tariffs, or the defense sector, benefiting from increased military spending driven by geopolitical tensions. However, there is a much deeper, underlying issue:
The tariff war is only the tangible epicenter of a framework of deeper geopolitical changes that are redefining the international blocs of the coming decades.
Given this new scenario, a key question arises: How will this “domino effect” continue, and where should Spanish companies focus their attention? To answer this, we can make a prediction based on the EU’s most recent moves:
- In Spain and the rest of Europe, the void left by the erosion of historical relations with Washington will lead to a political and commercial rapprochement with other powers, such as China, India, and Latin America.
- Within the EU, Spain will emerge stronger, as it is one of the economies least affected by the tariffs; its exports to the US represent less than 2% of its GDP, while in Italy and Germany they reach around 10% and in France close to 7%.
We are at a unique moment of rupture with the multilateral system built over the last few decades. The pieces haven’t finished falling yet, and we don’t know the role each player will play, but we can already begin to glimpse the contours of the new international order that will shape the future.
Although the disruptive nature of some news continues to surprise us, one thing seems clear: if we don’t update the map with our international perspective, we will hardly be able to take advantage of the new rules of the game.
