German Chancellor Merz Signals EU Openness to Tougher China Trade Stance

BERLIN — German Chancellor Friedrich Merz said Thursday that the EU must defend itself against unfair trade practices, signaling greater openness to recent European Commission proposals for a tougher approach to China.

Merz addressed lawmakers in Germany’s Bundestag ahead of next week’s EU summit, where leaders are set to discuss how to respond to China’s industrial overcapacity and subsidized exports, which Europe's leaders, including in Berlin, increasingly say is leading to European deindustrialization.

"Europe benefits more than any other continent in the world from open and fair global trade," Merz said. "That is and remains true. But it is also true that where others fail to comply with common rules, we cannot and will not stand idly by. We protect our interests and our economy against trade practices by other countries that distort competition."

Berlin was historically one of the few EU countries to run surpluses with Beijing. But since the Covid pandemic, Germany's trade relationship has flipped to an eye-watering deficit — €90 billion in 2025 — and China is widely blamed for much of the hemorrhaging of jobs in Germany’s all-important manufacturing sector — now running at roughly 10,000 job losses per month.

This is prompting calls from some in German industry for Europe to take a tougher approach to China. Berlin has recently started to shift its position — driven in part by sluggish growth and an industrial downturn exacerbated by Chinese competition — leaving Spain as the last major opponent of a tougher EU trade policy toward China.

"At the European Council, we will discuss how we can expand our toolkit within the European Union," Merz said. "We want to leverage the attractiveness of our single market to enforce rules for fair and transparent competition."

Among the options being considered by the European Commission is a so-called overcapacity instrument to address state subsidies that lead to the accumulation of vast quantities of goods in strategic sectors. The Commission is also considering additional trade measures against imports harming local industry.

In an apparent effort to avoid an overt confrontation between some of the world's largest trade areas, French President Emmanuel Macron was planning a video call Thursday with G7 leaders and China to address "macroeconomic imbalances," which is code for China’s staggering trade surpluses with the EU and the U.S.

Another issue EU leaders will discuss at their summit in Brussels next week is the EU's long-term budget. Germany, along with other frugal countries, wants to sharply reduce the overall size of the €1.8 trillion cash pot.

"Compared to the proposals currently on the table, we need truly significant changes across the board," Merz said. "Incidentally, in all European countries, very tough efforts are often being made to consolidate national budgets. The citizens of our country and our continent rightly expect Brussels to exercise restraint as well — in terms of both money and personnel."

Camille Gijs contributed to this report from Brussels.