BERLIN — Friedrich Merz, the prospective German Chancellor, has highlighted the pressing implications of Donald Trump’s recent tariffs, which have adversely affected Germany’s stock market. Merz argues that these developments underline the necessity for tax reductions and regulatory reform.
On Monday, Germany’s primary stock index experienced a significant downturn, plummeting by 10 percent before making a modest recovery. This reaction came in response to Trump’s announcement of sweeping import tariffs, which are anticipated to disrupt the global economy.
“The situation on the international equity and bond markets is dramatic and threatens to get worse,” Merz stated. “It’s more important than ever for Germany to restore its competitiveness. That must be at the heart of coalition talks.”
Germany’s economic strength is heavily reliant on its exports, including machinery, chemicals, and automobiles, with the United States being a crucial market. In recent years, German exports have faced challenges, including rising energy costs, and the introduction of a 20 percent tariff by the Trump administration has compounded these difficulties for the industry.
The shock to the financial markets has injected new urgency into coalition discussions between Merz’s Christian Democrats (CDU) and the Social Democrats (SPD) following the national elections held on February 23. Although the CDU secured the highest number of votes, they did not obtain a majority, necessitating negotiations with the SPD to form a coalition government.
According to German media reports, coalition talks were temporarily suspended on Monday as Merz, outgoing Chancellor Olaf Scholz, and SPD leaders convened to strategize a response to the United States’ tariff measures.
Merz, known for his fiscal conservatism, has encountered some internal dissent after endorsing a constitutional amendment that would allow for up to €1 trillion in new debt—an essential demand from the SPD and Green Party. His remarks on Monday aimed to reinforce the CDU’s traditional commitment to fiscal discipline and economic stability in light of a rapidly evolving global landscape.