It is March, but in the time it has taken to put away the Christmas tree, the world has changed more than many of us expected. 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 escalation of the trade war with China to the uncertainty over NATO, the rearmament of the European Union (EU) and the new tariff attacks in North America, each piece that falls alters the global balance and pushes the next. The geopolitics of multilateralism of the past decades is tottering, and with its last throes, the margins of a new global context are being drawn.
Following these changes on a day-to-day basis has not been easy, so let’s take the opportunity to gather headlines and analyze this domino effect: let’s see which pieces have fallen, which are about to fall and how the chessboard 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 long-term advantage. It is an illustrative analogy, as it allows us to emphasize that the new administration’s imposition of tariffs on China is having (and will have) a cost.
While these tariffs affect more the Chinese trade balance, they also represent an economic and political risk for the U.S. The U.S. stock market plunged after the announcement, dragging down Western markets, while Shanghai and Hong Kong remained stable and even registered slight growth. The tariffs may have a huge impact on strategic sectors for the US, and we will not be able to gauge 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 tariff impact. It remains in surplus and has since continued to expand its influence in Asia, Africa and Europe, reducing its dependence on the US market.
Rather than focusing on a tariff war of attrition, Beijing may choose to compete for geopolitical leverage, taking advantage of U.S. friction with other players.
2. Mexico and Canada, two new chips to drop
While the trade war with China was foreseeable, the real blow on the chessboard has been the declaration of a tariff war against historical US trading partners, affecting NATO countries and the EU, with a particularly immediate impact on Mexico and Canada. The announcement of tariffs of 25% on most imports from the latter two is, above all, a crude declaration of intent for the West.
Canada has already responded with its own tariffs on the U.S., which has triggered a new tug-of-war on tariffs between the two countries. Mexico, on the other hand, has opted to buy time: it has delayed the entry into force of its countermeasures by one month and appears to be betting on stimulating its domestic economy.
The reading of these measures at the beginning of the legislature must be political, and not only economic. The trade confrontation with America’s traditional trading partners leaves a strategic vacuum that, when it comes to international geopolitics, never takes long to fill. The EU, in particular, has made the most significant shift.
3. The European Union is accelerating its commitment to 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: goods that are emblematic or manufactured in key states for Trump.
These tensions are compounded by Washington’s criticism of its defense allies. NATO remains too valuable a piece for the US to sacrifice, but for European countries it has been a wake-up call about their strategic dependence.
In response, and in line with a pre-existing trend of making security investment one of its core focuses, the EU has announced an investment of 800 billion euros in defense, marking a shift in its geopolitical focus over the coming decades. To size up the magnitude of this figure, the Next Generation funds, earmarked for Europe’s recovery after the COVID-19 crisis, were only 750 billion euros.
The key? The same dynamics that are drawing a divide with the U.S. will also blur the contours of Europe’s map of strategic allies. 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 looking.
Conclusions: How can Spain play while the board is still being assembled?
To recap, the new U.S. administration’s tariff strategy has accelerated a series of changes that go beyond trade, with a consequent knock-on effect:
- The U.S. increases 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 historic 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 for its degree of autonomy.
The impact is multiplied in the 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 question, a prediction can be made based on the most recent movements in the EU:
- In Spain and the rest of Europe, the vacuum 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.
- In 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 chessboard of multilateralism built over the last decades. The pieces have not yet finished falling and we do not know the role that each player will play, but we can already begin to glimpse the contours of the new international order that will mark the future.
Although the disruptive nature of some news never ceases to surprise us, one thing seems clear: if we do not update the map with our international perspective, we will hardly be able to take advantage of the new rules of the game.
