The prospect of being forced to pivot again on foreign policy looms over Germany's incoming chancellor, Merkel. Following the Trump administration's imposition of "reciprocal tariffs," including a 20% tariff on imports from Germany and other EU countries, Merkel's past confidence in the U.S. has been shaken, while the chaos sparked by the trade war makes a rapid economic recovery even more distant.

As coalition talks between Merkel's conservative Christian Democratic Union (CDU) group and the center-left Social Democrats hit a deadlock over tax policies and immigration issues, trade matters have been pushed to the forefront. Bloomberg reported that Merkel's alternative options include reconsidering his long-standing stance against closer ties with China or developing other markets for Germany's export-dependent economy.

The path ahead for Germany, Europe's largest economy, is fraught with challenges, putting immense pressure on Merkel. He has alienated some conservative voters as the CDU chairman abandoned fiscal restraint and proposed a spending plan financed by tens of billions of euros for defense and infrastructure. Since the U.S. announced the implementation of "reciprocal tariffs," the 69-year-old Merkel has remained silent, but his future government partners have clearly stated that continuing to rely on goodwill from the White House is not an option.

Schmidt, the Social Democrats' foreign policy spokesperson, told Bloomberg that "Trump has launched a trade war between the U.S. and the rest of the world." He called for retaliatory tariffs against the U.S., diversifying trade relations, and coordinating with Canada, Mexico, and Asian partners. The plan should not have turned out this way.

Merkel has repeatedly made it clear that under his leadership, Germany will take a tougher stance toward Beijing and strengthen transatlantic relations. However, Trump's tariff blitz disrupted Merkel's repositioning plans and raised questions about where Germany will sell its exports.

Reichel, the outgoing Green Party German Economics Minister, hinted that Merkel is not up to the task and urged the next government to abandon "assumptions from the 1990s." Reichel said on Thursday in Berlin, "We can no longer depend on others being good to us. Fully accepting reality is the new paradigm that the new government must follow." Although Chancellor Scholz quickly criticized Trump's tariffs as "fundamentally wrong," Merkel has yet to make any public comments.

When Germany faces unprecedented uncertainty in its trade relations with the U.S., Merkel published an article about the late former Chancellor Kohl. A CDU spokesman declined to comment on Merkel's China policy, stating he is focused on coalition negotiations. In the past, Merkel's closeness to Washington and distrust of Beijing were evident. In a speech before Germany's general election on February 23, he warned German companies of the "significant risks" involved in investing in China.

Merkel then told the audience, which included Chinese Ambassador Deng Hongbo, "I sincerely urge all companies... to limit the risks you undertake to avoid jeopardizing your own companies due to immediate write-offs."

Merkel said, "If you take this risk, you must anticipate major disruptions. I have discussed this issue with many small and medium-sized companies and large companies... If you take this risk and have to write off these investments from one year to the next, please do not seek help from the state... in any case."

According to people present who wished to remain anonymous, Deng appeared annoyed and left soon after. The Chinese Embassy in Germany did not respond to Bloomberg's request for comment. Later, Foreign Ministry spokesperson Mao Ning responded at a regular press conference, calling on Germany to "view China's development objectively and rationally, uphold traditional Sino-German friendship, recognize the win-win nature of Sino-German cooperation, and do more things beneficial to both countries and their peoples."

A few weeks later, Merkel reiterated his preference for dealing with Washington, seemingly undeterred by Trump and his administration's questioning of the transatlantic alliance. At a meeting hosted by the German automotive lobbying group in late January, Merkel said, "In recent weeks and months, I have become even more convinced that the U.S. market, including South America, is absolutely our safe haven."

Under the current chancellor Scholz's leadership, Germany has attempted to maintain positive relations with China, calling for de-risking rather than decoupling. While last year's trade volume with China did fall below that with the U.S., making China Germany's second-largest trading partner, this was more due to a decline in Chinese demand than due to government policy.

A document reflecting a tougher stance, which serves as the foundation for ongoing coalition talks about Germany's future foreign policy, calls for reducing "unilateral dependence."

The conservative bloc led by the CDU and the SPD wrote in the policy document seen by Bloomberg, "China has become a systemic rival; our desire for partnership elements and fair competition is increasingly unreciprocated, but we still seek cooperation where it aligns with our interests."

Another document from the CDU caucus in the German Bundestag emphasized potential disputes. Taking a tougher stance, it suggested reviewing foreign investments, relocating production and supply chains to Europe, and diversifying trade relations.

Bloomberg reported that behind the scenes, Merkel views China as a survival threat to Germany's security and is determined to control bilateral relations. This signals significant changes in Sino-German business relations, with last year's total imports and exports between the two countries reaching nearly 246 billion euros. According to data from the Deutsche Bundesbank, German companies' cumulative investments in China, including those of Volkswagen, BASF, and hundreds of small manufacturers, reached 107 billion euros.

Merkel's stance toward China stems from his time away from politics. According to an unnamed participant, at a recent closed-door dinner, Merkel said that during more than a decade as a corporate lawyer, he developed a crisis of trust with Chinese partners.

According to someone familiar with his thoughts, Merkel initially hoped that his critical stance toward China would help build friendly relations with the Trump administration. Merkel has repeatedly expressed openness to political agreements with Trump.

Dobrint, the chairman of the CSU caucus in the Bundestag, is one of the few senior conservatives to publicly comment on Trump's tariff stick. Dobrint told reporters in Berlin, "This will put pressure on global trade relations." He added, "Stable growth is key for Germany." Dobrint said, "This way, we can also resist threats from the U.S. But now this task has become more difficult."

Source: rfi

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