Key facts
- German Chancellor Friedrich Merz called for "Plaza Accord"-style talks with China.
- The talks would address the yuan's undervaluation and Chinese subsidies.
- Germany is signaling a willingness to consider stronger EU trade defense measures.
- The European Commission will develop new trade defense tools.
- A diversification instrument is among the new trade tools planned.
- The EU aims to address its "unsustainable" trade deficit with China.
- EU leaders are backing a strategy of de-risking, not decoupling, from China.
- European leaders are debating responses to a surge in Chinese exports.
- The surge in Chinese exports is impacting domestic EU industries.
- Friedrich Merz is calling for a reduced EU budget.
- These discussions are taking place ahead of European Council summit talks.
German Chancellor Friedrich Merz has indicated a significant shift in Berlin's approach to China, suggesting the EU should pursue "Plaza Accord"-style talks to address the undervaluation of the yuan and Chinese subsidies. This proposal signals a potential willingness from Germany to consider stronger EU trade defense measures against China. The European Commission is concurrently developing new trade defense tools, including a diversification instrument, to combat what it describes as the EU's "unsustainable" trade deficit with China. European leaders are actively debating how to respond to a substantial increase in Chinese exports that is negatively affecting domestic industries within the EU. The strategy being discussed emphasizes "de-risking" rather than complete "decoupling" from China, while also maintaining channels for dialogue. This situation is unfolding ahead of further discussions at the European Council summit, where German politician Friedrich Merz is also advocating for a smaller EU budget. The leaders are contemplating the potential for a trade war with Beijing as they consider their next steps to address the economic challenges posed by Chinese exports. The outcomes of these discussions are being closely monitored for further developments regarding the EU's trade policy towards China and its internal budgetary matters.