Germany’s Merz courts Trump, but faces economic headwinds: lessons for ASEAN

Among them, German Chancellor Friedrich Merz has proven unusually adept at winning Trump’s ear. That is a striking contrast with Trump’s first term, when Angela Merkel became a favourite target of his disdain—derided for her refugee policy and defence “delinquency.”

Merz has managed to persuade Trump that Berlin is finally aligned with Washington on immigration, defence spending, and energy. In doing so, he demonstrates a survival instinct that resonates far beyond Europe.

For Merz, this is more than public relations. His government’s signals—greater defence spending, stricter migration control, and a more “ideology-free” energy mix—fit neatly with Trump’s ideological playbook.

Germany now appears as a dependable ally rather than a recalcitrant one.

That pivot has unsettled Germany’s far-right Alternative for Germany (AfD). Once among Trump’s loudest fans, AfD leaders now watch in frustration as the U.S. president praises Merz on precisely the issues they weaponize against him: migration and renewable energy.

Yet winning Trump’s ear is one thing; fixing Germany’s structural problems is quite another. Industry malaise has deepened. Manufacturing firms that once powered the German postwar miracle are cutting jobs.

Unemployment crossed three million in August—the highest in a decade. Economists forecast negligible growth, even after Berlin unleashed hundreds of billions of euros in borrowing for infrastructure and defence.

Industry leaders are sounding the alarm. “The mood in our industry is no longer just tense—it is furious,” said Bertram Kawlath of VDMA, Germany’s machine-building lobby. They see hesitation and delay, not strategy, from a chancellor who once promised business-minded decisiveness.

Even planned summits on competitiveness cannot mask the absence of a coherent industrial policy.

This is where the ASEAN angle matters. Southeast Asia is carefully observing how Germany navigates its economic and political balancing act. The German case illustrates the limits of external validation when domestic fundamentals remain weak.

ASEAN economies, equally vulnerable to Trump’s tariffs on steel, autos, furniture, and even pharmaceuticals, must remember that appeasing Washington may secure short-term concessions but cannot substitute for deep structural reform at home.

Malaysia, as ASEAN Chair in 2025, faces this reality most directly. Prime Minister Anwar Ibrahim has been trying to mediate regional conflicts while also shielding ASEAN economies from the spillover effects of Trump’s tariff regime.

The temptation to “win Trump’s ear” through selective concessions is real. But ASEAN’s deeper challenge lies in strengthening its own economic resilience—building supply chain redundancy, reforming labour and pension systems, and ensuring that industrial policies are genuinely strategic.

Merz’s predicament also offers a cautionary tale on defence procurement. Berlin has announced that only 8 percent of its massive rearmament drive will go to U.S. weapons, with the lion’s share directed to European industry.

Trump, who has long demanded that allies “buy American,” sees this as disloyalty. The tension highlights the transactional nature of his worldview: security as leverage to extract economic advantage.

ASEAN knows this dynamic well. The Philippines, Thailand, and even Vietnam have faced similar pressure when balancing U.S. arms purchases against cheaper or more flexible alternatives from Europe, South Korea, or even Russia.

The lesson is clear: unless ASEAN builds its own defence industrial base and commits to regional resilience, it will always be caught between the transactional expectations of external powers.

At the same time, Germany’s struggles with growth and competitiveness echo ASEAN’s own concerns. Intra-ASEAN trade still hovers below 25 percent, despite decades of tariff reductions.

Industrial modernization is uneven, with some economies surging ahead in semiconductors and digital services, while others remain dependent on commodities. Just as Merz confronts an industry clamouring for reform, ASEAN leaders face their own restless private sectors demanding policy certainty, better infrastructure, and credible long-term strategies.

Merz’s reliance on borrowing to fund infrastructure mirrors debates within ASEAN states about fiscal space.

Germany may be able to marshal hundreds of billions in debt, but ASEAN economies with narrower tax bases face far tighter constraints.

The German case shows that even huge spending commitments cannot substitute for clear direction. Without a unifying strategy, money dissipates into piecemeal projects with little transformative effect.

For ASEAN, the takeaway is twofold. First, external charm offensives—whether directed at Trump or Beijing—cannot shield weak economies from global shocks.

Second, structural reform must come first: pension sustainability, labour mobility, and digital transformation cannot be delayed indefinitely.

Ultimately, Friedrich Merz’s story is not only about Germany’s place in transatlantic relations, but also about the universal challenge of governing under Trump’s tariffs and threats.

ASEAN states can empathize with the dilemma: how to maintain favour with Washington without losing autonomy, how to borrow or spend without strategic clarity, and how to reform in ways that genuinely prepare economies for future turbulence.

If Berlin, with all its resources and history of economic strength, is struggling to chart a coherent path forward, ASEAN must recognize that its own margin for error is far smaller.

Germany’s difficulties are not distant—they are a mirror for ASEAN’s own vulnerabilities.

In the end, Merz may succeed in convincing Trump that Germany is a loyal partner. But unless he restores competitiveness at home, his political survival will remain precarious.

For ASEAN leaders, watching from Kuala Lumpur, Jakarta, or Manila, the lesson is unmistakable: charm is temporary, but reform is destiny.