When Friedrich Merz stepped before the microphones at Berlin’s annual Open Day, the message he carried was one of blunt pragmatism: Germany, and by extension Europe, can no longer pin its economic future solely to Washington.
For a man long seen as a sober technocrat, his words landed with an unmistakable political charge. “How do we handle world trade if, for example, the Americans are no longer prepared to play by the rules of the World Trade Organisation?” he asked, to murmurs of assent.
It is a fair question, and one that reaches well beyond the mechanics of tariffs and trade schedules. The “framework” agreement hammered out between President Donald Trump and Ursula von der Leyen last month — slapping a flat 15 per cent tariff on EU goods entering the United States — is not, as some in Brussels pretended, a diplomatic success. It is a tax, dressed up in the language of partnership. Germany, the great exporting powerhouse of Europe, feels its sting most directly. And Merz, leading a CDU locked in a polling dead heat with the insurgent Alternative für Deutschland, has sensed the public mood turning.
The tariff trap
For decades, Berlin assumed that the rules-based order of trade — anchored in the WTO, protected by the US-led Atlantic alliance — was permanent. That assumption is now in tatters. Trump has little time for multilateralism; his instincts are transactional. If European cars or machine tools enjoy a comparative advantage, then they must, in his view, be handicapped by tariffs. Such is the new American orthodoxy.
Europe’s response has been predictably muddled. Brussels trumpeted the 15 per cent figure as “better than it might have been” — an act of spin that fooled no one in German industry. For a nation where exports make up nearly half of GDP, the margins matter. The Mittelstand firms in Baden-Württemberg and Bavaria, whose lathes and turbines underpin the industrial backbone of the continent, now face a competitiveness crisis in their single largest overseas market.
Merz the realist
Merz’s intervention reflects both political calculation and a genuine shift in economic thinking. At 25 per cent in the polls, the CDU is neck-and-neck with the AfD, a radical-right party feeding off discontent in the east of the country. To recover ground, the CDU leader must present himself not as a Brussels loyalist but as a defender of German economic sovereignty. Hence the call for “new partners” in South America, Asia and Africa.
This is not merely rhetoric. Latin America’s Mercosur bloc, long stalled in negotiations with the EU, suddenly looks attractive again. Trade with India, often spoken of but rarely prioritised, could take on new urgency. Africa, with its young population and untapped consumer base, offers another horizon — if Europe is prepared to compete with China.
The pivot Merz suggests is difficult, but not impossible. It requires Berlin to shake off its habitual Atlanticism and begin treating global trade with the same ruthless opportunism long practised by Beijing. For a party often accused of timidity, this marks a notable shift in tone.
Social security and the domestic bind
But Merz’s speech was not all geopolitics. He also raised the unglamorous, but vital, question of Germany’s welfare state. Employment benefits, pensions and health spending are rising faster than the economy can sustain. “We have to make our social security systems fit for the future,” he warned.
This was not a throwaway line. Demographics are Germany’s great ticking time bomb. With one of the world’s fastest-ageing populations, the burden on the working-age taxpayer is becoming intolerable. For Merz, the link between trade and welfare is obvious: if exports stall, revenues fall, and the fiscal capacity to fund generous welfare collapses. Unless reform comes soon, the German model — high productivity, high social spending, export surplus — will buckle.
Europe’s leadership void
There is another layer to Merz’s remarks that should not be overlooked. His critique implicitly points a finger at Brussels, and in particular at Ursula von der Leyen. The Commission President, once Merkel’s loyal lieutenant, now cuts a diminished figure in Berlin. Where Merz speaks of strategic realignment, von der Leyen clings to the illusion that the EU and US remain equal partners in a shared project. The tariff deal she brokered has exposed the hollowness of that claim.
In the European public imagination, the Commission is supposed to defend continental interests. Instead, it looks like a supplicant. Merz, in contrast, has offered a vision — still sketchy, but tangible — of an outward-looking Germany prepared to hedge against American caprice. In doing so, he casts himself not only as a national leader but as a statesman-in-waiting for Europe.
What comes next?
The road ahead is fraught with obstacles. Pursuing new trade partners is easier said than done: Latin America is protectionist, India prickly, Africa unstable. Nor is it clear that German voters, long accustomed to the comforts of the transatlantic alliance, are ready for the risks of such a pivot. Yet the alternative — clinging to a US relationship increasingly defined by tariffs, ultimatums and diplomatic snubs — looks worse.
Merz’s gamble, then, is to position himself as the man willing to speak hard truths, while his rivals in Brussels deal in illusions. The CDU may not yet have found a winning formula, but the outlines of one are emerging: fiscal discipline at home, diversification abroad, and a steady hand at the tiller in turbulent times.
Friedrich Merz has long been underestimated. Dismissed as a technocrat, overshadowed by Merkel, and seen as too cautious for the modern age, he is now seizing a moment of flux. By calling time on the pretence of tariff “partnerships” with Washington and pointing towards new horizons, he has begun to sketch a path forward.
Whether Germany follows him remains to be seen. But in a Europe where leadership is scarce and Brussels looks increasingly out of its depth, Merz’s realism carries weight. In trade, as in welfare, he is reminding Germans of a simple truth: the world owes them nothing, and unless they adapt, they will pay the price.
