Merz Calls for International Exchange Rate Negotiations, Says Yuan Undervalued by 30%
Alina Collins
German Chancellor Friedrich Merz said after the EU summit that the bloc is competing against a country whose currency is undervalued by up to 30%, calling for Plaza Accord-style multilateral exchange-rate negotiations — a clear reference to China's renminbi, with strong U.S. backing already secured.
What exactly did Merz say?
Speaking in Brussels after the EU summit, Merz said the EU faces a competitor whose currency is undervalued by up to 30%.
He did not name China directly, but the renminbi is widely understood to be the target.
This means → the leader of Europe's largest economy is elevating exchange rates from a technical debate to a political agenda item.
Why invoke the 1985 Plaza Accord?
The Plaza Accord — a 1985 deal in which finance ministers from the U.S., Japan, Germany, France, and the U.K. coordinated to push the dollar lower — remains the landmark case for multilateral currency intervention.
Merz was explicit: "That is also the direction I have in mind now."
In plain terms = he wants to replay the 40-year-old playbook — major economies sitting down and negotiating currencies back to "fair value."
Where does Washington stand?
Merz said his push at the G7 meeting earlier this week received strong U.S. support.
Bipartisan U.S. senators wrote to Treasury Secretary Scott Bessent this week, urging G7-level coordination to pressure China.
Their language — "deliberately depressing its currency for commercial advantage" — This means → both parties in Washington have aligned on the renminbi question, a rare point of consensus.
What else did Merz target?
He argued that when subsidies are systematically poured into overcapacity, and the whole picture is paired with a currency that is not freely convertible and effectively outside capital markets, "these competitive distortions are ones we cannot accept."
In plain terms = Merz's logic chain is: subsidies + overcapacity + currency controls = a triple layer of unfair competition — not just an exchange-rate complaint.
Why is the EU itself hesitant?
The EU depends on China for critical raw materials and intermediate goods, and does not want to trigger a trade war.
The summit's conclusion — tasking the European Commission with "continuing dialogue while strengthening trade-defence tools" — This reflects a Europe caught between wanting leverage and fearing blowback.
This means → Brussels's current strategy is to negotiate while reinforcing defences, not to force a showdown.
Why is Beijing unlikely to budge easily?
Economists note that Beijing remains deeply wary of what followed the Plaza Accord: the yen's rapid appreciation fuelled asset bubbles and financial turmoil in Japan.
China's own 2015 one-off renminbi devaluation rattled global markets and shook confidence in Beijing's ability to manage its currency.
In plain terms = whether it is someone else's cautionary tale or its own, Beijing has ample reason to resist any abrupt currency adjustment.
Content is for reference only, not financial advice.