Europe’s trade gap with China just hit a number that’s hard to ignore. The EU’s goods trade deficit with China reached €360 billion in 2025, a nearly 20% jump from the prior year, and German Chancellor Friedrich Merz is signaling he’s done watching from the sidelines.
Germany alone accounts for roughly €90 billion of that deficit, a figure that surged 33% year-over-year.
The yuan problem and a historical playbook
Merz has zeroed in on what he sees as the root cause: China’s currency. He estimates the yuan is undervalued by as much as 30%, a figure notably more aggressive than the IMF’s own estimate of roughly 16%.
His proposed solution carries some historical weight. Merz is pushing for international dialogue on currency valuations, drawing comparisons to the Plaza Accord. The Plaza Accord was a 1985 agreement among five major economies to deliberately weaken the US dollar against the Japanese yen and German mark.
