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German Chancellor Friedrich Merz has backed protectionist measures to shield the country’s ailing steel industry from cheap Chinese imports, in a striking departure from the country’s traditional commitment to free trade.
Speaking on Thursday after talks with representatives of the steel sector at the chancellery, Merz said proposals from the EU Commission to increase tariffs on steel imports and reduce duty-free quotas were going “in the right direction”.
He also supported taxing imported goods from countries that do not apply the same CO₂ emissions standards as the EU, and said he would favour incentives for companies to source EU-produced steel.
This stance was “different from what we always thought was right in earlier times”, Merz said, adding that in those times markets were open, competition was fairer and the US had not embraced tariffs.
“Unfortunately, these times are gone and that is why we must protect our markets, that’s why we must protect our manufacturers,” he added.
Once a strong defender of free trade, Germany has been severely hit by US tariffs imposed on EU goods earlier this year, which have compounded the country’s economic woes after three years of stagnation.
In particular German steelmakers such as Thyssenkrupp, as well as manufacturers using steel components, have been hit by 50 per cent tariffs. Germany is by far the EU’s largest steel producer.
Meanwhile, Donald Trump’s import levies on other countries including China have pushed a flood of cheap metal diverted from the US market into the EU.
The stance is a “remarkable” U-turn from Merz, said Carsten Brzeski, global head of macro at ING. “Particularly given that as opposition leader, Merz was against EU tariffs on China and any protectionism. It shows that . . . he had completely underestimated the dire economic situation of the country.”
Steelmakers announced 18,000 job cuts throughout the EU in 2024, adding to the 90,000 job losses since 2008. Thyssenkrupp has set out plans to slash 11,000 jobs in Duisburg in the industrial Ruhr region — or 40 per cent of its workforce there.
However tariffs on steel imports would indirectly hurt equipment — and carmakers, which are also squeezed between US tariffs and cheaper competition from China.
While a “certain level of protection may be sensible”, “the very far-reaching additional measures” proposed by the EU Commission could lead to “additional strain on supply chains,” said the automotive trade association, the VDA.
The German government believes that an increase in the costs of steel components will be manageable, officials said.
Higher tariffs on Chinese steel may also worsen already fraught relations with Beijing. Foreign minister Johann Wadephul last month cancelled a planned trip to China at the last minute amid mounting tensions, including over Chinese export controls on rare earths.
“Effective EU trade defence measures against unfair import pressure are essential, as are competitive energy prices and greater domestic value creation,” Thyssenkrupp said.
Merz on Thursday also said he was seeking “clarity” from the EU Commission on whether his government would be allowed to subsidise electricity prices for energy-intensive companies from next year.
His coalition is looking to slash electricity costs — among the highest in Europe — for about 3,000 companies, mostly in the chemicals and plastics sector. It is also looking to add steelmakers to the list, or secure the option of increasing energy aid that the sector already receives.
The commission said that it was in “constructive contact” with Germany on the electricity price subsidy scheme to find “suitable solutions in line with EU rules”.
Merz signals a “clear shift” and “partly standard protectionism”, said Holger Schmieding, Berenberg bank chief economist. “But it reflects geopolitical realities. Europe needs to maintain steelmaking capacities to not be dependent on potentially unreliable foreign suppliers. Even sophisticated weapons need steel.”
Additional reporting by Sebastian Ash in Frankfurt and Andy Bounds and Alice Hancock in Brussels
