Merz's China blame convenient fiction

German Chancellor Friedrich Merz has discovered a political escape hatch for German voters' discontent: talk about China.

On Sunday, the Christian Democratic Union received just 4.9 percent of the vote in Mecklenburg-Western Pomerania, falling below the threshold for entering the state parliament for the first time in postwar Germany. In Berlin it came second with 18.8 percent, while Die Linke took 25.7 percent. The Alternative for Germany (AfD), meanwhile, won 38.2 percent in Mecklenburg-Western Pomerania. Merz himself called the CDU's performance a "disaster".

There is presumably a sophisticated economic explanation for these numbers. It is called domestic politics.

Germany's problems are hardly mysterious. Growth has been feeble. Energy remains expensive. Industry is struggling with structural change. The pension system faces demographic arithmetic that no chancellor can negotiate away. Public services are under strain. Bureaucracy is legendary. The governing coalition quarrels over how much reform voters will tolerate — and the voters have grown impatient.

Yet Merz has of late seemed particularly interested in diagnosing a different ailment: China.

His government is considering tougher measures against Chinese competition, including tariffs, import restrictions, tighter investment screening and other economic-security instruments. Merz has also falsely accused China of keeping the renminbi "artificially cheap" and invoked the Plaza Accord as a possible historical model for currency pressure. German officials have called for action against Chinese new energy vehicles and other industrial sectors.

There is a rather large intellectual gap between saying that China presents particular competitive challenges and suggesting that Germany's broader economic predicament can be solved by making Chinese goods more expensive.

Unfortunately, the arithmetic does not work that way.

Germany's structural contradictions are overwhelmingly German. It wants a generous welfare state with an aging population. It wants industrial competitiveness alongside costly energy. It wants rapid decarbonization without sacrificing manufacturing. It wants less regulation while adding ever more rules. It wants to remain an export powerhouse while becoming less exposed to foreign markets. These are serious dilemmas. None can be blamed on Beijing.

Nor is protectionism free. German manufacturers are deeply embedded in international supply chains and depend on both foreign markets and imported inputs. A trade barrier may shelter one producer while raising costs for another. Retaliation is always possible. And for an economy whose modern prosperity was built partly on selling things abroad, turning trade into a series of defensive fortifications is an odd route to renewal.

Roughly half of China's exports to Europe are intermediate goods — components embedded in European manufacturing supply chains that help European companies cut costs and raise efficiency. Even after tariff clashes, China remains a relatively predictable and reliable trading partner.

Merz should therefore be careful about confusing political pressure with economic diagnosis. The rise of the AfD in the east and the surge of Die Linke in Berlin point to a broader fragmentation of Germany's political center. Voters are arguing about immigration, housing, energy, jobs, public services and the credibility of government. They are not conducting a referendum on the optimal exchange-rate regime for the renminbi.

There was a useful reminder of this on Monday. In a telephone call with German Foreign Minister Johann Wadephul, Chinese Foreign Minister Wang Yi stressed that China and Germany should strengthen strategic communication, uphold multilateralism and free trade, and resolve China-EU economic and trade differences through dialogue and consultation.

Wang rightly urged Germany to remain "rational and pragmatic" and to play a constructive role within the EU. Wadephul said Germany supported addressing EU-China differences through dialogue and wanted to deepen economic co-operation.

Merz's immediate task is to persuade voters that pension reform is sustainable, that industry has a future, that energy policy is affordable and that bureaucracy can actually be reduced rather than merely renamed. He should reconcile a coalition whose members disagree about what reforms are needed.

China cannot do any of these things for him.

The danger for Merz is not that he is insufficiently tough on China. It is that he becomes very good at being "tough" on China while remaining unable to explain why German voters should be optimistic about Germany.

After all, a chancellor can always find a foreign country to blame. Governing requires the considerably less easy task of putting one's own house in order.