The German economy’s strength lies in exporting goods such as machinery, chemicals and vehicles, and the United States is a key market. German exports have already become less competitive in recent years due to higher energy prices and other factors, and the 20 percent tariff implemented by the Trump administration is further unwelcome news for industry.
The market shock added new urgency to coalition negotiations between Merz’s center-right Christian Democrats (CDU) and the center-left Social Democrats (SPD), following national elections on Feb. 23.
The CDU came out ahead in the vote but failed to win a majority, forcing Merz into talks with the SPD to form a government. Coalition negotiations were briefly paused Monday as Merz, outgoing Chancellor Olaf Scholz and SPD leaders held consultations on how to respond to the United States measures, German media report.
Merz, a longtime fiscal hawk, has already faced internal pushback after endorsing a constitutional amendment to allow up to €1 trillion in new debt — a key SPD and Green Party demand. His comments on Monday aimed to reassert the CDU’s traditional focus on fiscal and economic discipline amid a shifting global landscape.
