The EU's trade deficit with China reached €360 billion in 2025, with Germany alone accounting for €90 billion, a 33% increase year-over-year.
Merz identifies the undervalued yuan, estimating a 30% shortfall compared to the IMF's 16%. He advocates for discussions similar to the 1985 Plaza Accord to address currency valuations.
German car exports to China plummeted 66% from 2022, largely due to Chinese EV overcapacity. Major automakers express concern over potential retaliation from Beijing affecting access to the Chinese market.
Merz, in office since May 2025, visited China in February 2026 but did not align with EU trade protection proposals. A summit in June 2026 will shape EU strategies moving forward.
Investors should be wary as European automotive stocks may feel pressure. Merz’s proposed yuan intervention could signify a dramatic shift in currency valuations, critical for investors to monitor as the summit approaches.