German Chancellor Friedrich Merz is considering steps to address a €360 billion trade deficit with China, a move that could reshape the European Union’s commercial ties with Beijing. The push for currency reform sits at the center of the discussion, with potential fallout for industries that lean heavily on Chinese markets and supply chains.
The scale of the deficit
The €360 billion figure represents the gap between what Germany buys from China and what it sells there. It’s been a growing source of friction within the EU, where member states worry about overdependence on a single supplier. Merz hasn’t detailed what action he’s eyeing, but the size of the imbalance makes it hard to ignore.
Why currency reform is a lever
Germany’s interest in currency reform with China isn’t new, but it’s now getting top-level attention. The idea is that adjusting the yuan’s value—or how it’s managed—could make German exports cheaper and Chinese imports more expensive, slowly chipping away at the deficit. Such a shift wouldn’t happen overnight, and it would require coordination among EU capitals. The broader trade dynamics across the bloc could change if Berlin pushes hard for this.
Industries in the crosshairs
The sectors most exposed are the ones that rely on Chinese components or sell into the Chinese market. German automakers, machinery builders, and chemical producers all have deep ties to China, both as buyers and sellers. Any move to narrow the deficit could hit their supply chains or their sales, depending on how the policy is designed. Companies in these fields are watching closely, but Merz’s office hasn’t signaled which tools it might use.
What comes next
Merz is expected to lay out a more concrete plan in the coming weeks, though no formal deadline has been set. The European Commission will have a say, since trade policy is partly a Brussels affair. What form the action takes—tariffs, currency talks, or something else—remains an open question. For now, the €360 billion hole is the only number that’s clear.
