Currencies January 28, 2026

Merz Sounds Alarm on Dollar Weakness, Urges U.S. to Respect Trade Pact

German chancellor warns a strong euro and weak dollar are adding pressure to export firms and calls on the U.S. to uphold last year’s EU-US deal

By Sofia Navarro
Merz Sounds Alarm on Dollar Weakness, Urges U.S. to Respect Trade Pact

German Chancellor Friedrich Merz warned that the recent decline in the U.S. dollar and a stronger euro are creating a significant burden for Germany’s export sector. He also urged the U.S. government to avoid casting further doubt on the EU-US trade agreement reached last year, saying tariff uncertainty is harming both transatlantic trade and investment in America.

Key Points

  • Chancellor Friedrich Merz warned that a weak U.S. dollar combined with a stronger euro is straining Germany’s export sector.
  • The euro rose above $1.20 this week, driven by dollar weakness; President Donald Trump said in Iowa he was comfortable with the dollar’s decline.
  • Merz urged the U.S. to avoid actions that would undermine last year’s EU-US trade agreement, saying tariff uncertainty is harming trade and investment.

German Chancellor Friedrich Merz said he is closely monitoring the decline of the U.S. dollar and raised concerns about the consequences for Germany’s export-focused economy.

"We will have to assert ourselves globally against a weak dollar and a strong euro," Merz told reporters in Berlin on Wednesday. "We simply have to become more competitive and stronger, especially given the currency exchange rates."

Merz pointed to the recent movement in the currency markets, where the euro climbed above the $1.20 threshold this week as the dollar weakened. He noted that President Donald Trump, speaking in Iowa on Tuesday, said he was comfortable with the dollar's recent fall, a development that pushed the U.S. currency to its lowest level since early 2022.

The chancellor said he has been observing the dollar exchange rate "with concern for quite some time," describing the currency shifts as "a considerable additional burden for the German export industry."

Merz also addressed the status of last year’s EU-US trade agreement, which has not yet been fully implemented. He cautioned the Trump administration against actions that could create further uncertainty around tariffs.

"This uncertainty about tariffs is not only hurting transatlantic trade it’s also hurting investment in America," Merz said. "That’s why the American government should also have an interest in ensuring that the agreements we reached last summer are honored and not jeopardized by daily announcements that things might be changed."


Context and implications

Merz framed the current currency environment as an additional challenge for German exporters, tying the issue directly to competitiveness concerns. He emphasized that maintaining clarity and continuity in the EU-US trade agreement is important for trade flows and investment decisions on both sides of the Atlantic.

Merz’s comments linked currency moves, political statements, and trade policy uncertainty as interconnected pressures affecting exporters and transatlantic economic ties.

Risks

  • A sustained strong euro relative to the dollar could continue to weigh on German exporters and sectors reliant on cross-border sales.
  • Ongoing tariff uncertainty and public statements that suggest changes to trade commitments may reduce investment into the U.S. and disrupt transatlantic trade flows.
  • Political rhetoric or policy shifts that cast doubt on implementation of the EU-US agreement could further depress investor confidence in transatlantic sectors.

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