EU is not looking for trade war with China, Merz says

German Chancellor Friedrich Merz does not believe that the European Union is on a brink of a trade war with China, despite plans by the bloc to implement stronger safeguards against competition from Beijing.

Addressing a business conference in Berlin on Wednesday, Merz said that the EU was faced with "unfair practices" on the part of China. "And we have to talk about that," he added.

However, Merz said that this did not mean "the beginning of a war, of a trade war with China. We are looking for peaceful solutions, but the level for that is fair trade."

The German chancellor, alongside French President Emmanuel Macron, has been at the forefront of EU leaders pushing the bloc's executive to step up the fight against unfair trading practices by countries such as China.

At an EU summit last week, leaders asked the European Commission "to urgently enhance the EU toolbox with new instruments to better address these imbalances," after the bloc's trade deficit climbed to €1 billion ($1.12 billion) a day.

Leaders also encouraged the commission "to continue to engage in results-oriented dialogues." The statement did not mention China explicitly. 

The EU has so far counted on diplomacy and dialogue with Beijing to rebalance its commercial relations rather than tariffs and other restrictions.

Merz and Macron have jointly called for two new EU measures to tackle market-distorting practices that they say are undermining European companies and increasing the bloc's economic dependencies.

One is aimed at diversification, designed to ensure that companies do not become too dependent on suppliers from individual countries. The second is a procedure that would quickly allow a non-EU country to be excluded from the European single market should there be a flood of cheap imports.

Merz stressed on Wednesday that it was vital for the EU to be able "to protect our markets and defend ourselves against those who don't play by the rules."

"Anyone who disrupts the functioning of the markets through unfair subsidies, overcapacities, aggressive pricing, or artificially undervalued currencies must expect a response," he said.

The measures proposed by himself and Macron, Merz continued, would "enable us to respond swiftly and vigorously to targeted attacks on our industry and supply chain, with the idea being that in the best case we will not have to use it."

The EU was "not looking for a trade conflict," he said.

Two weeks ago, EU Trade Commissioner Maroš Šefčovič announced plans to curb the import of hybrid cars to the bloc.

This could lead to a fall of more than half in shipments to the EU, he said following talks with Chinese Commerce Minister Wang Wentao in Beijing.