German Chancellor Friedrich Merz has said his country must look beyond the United States and seek trading partners elsewhere.

Referring to the July 27 trade deal between the US and the European Union, which calls for 15 percent tariffs on EU goods arriving in the US, he said things could have been worse, but that Germany must now look for new markets.

"How do we handle world trade if, for example, the Americans are no longer prepared to play by the rules of the World Trade Organization?" the Reuters news agency quoted him as saying during a government open day in Berlin on Sunday. "We should search for partners in the world that share our thinking."

He said Germany might find those partners and mutually beneficial deals in Africa, Asia and South America.

"We must consistently go down that road," he added.

Merz, who is the leader of Germany's conservative Christian Democratic Union, or CDU, has led the government since May 6 and faces a serious challenge from the fast-rising far-right Alternative for Germany, or AfD.

In a poll published in Bild newspaper on the weekend, pollster INSA said Merz's approval rating stands at 25 percent, which is the same as that of the AfD.

With Germany's struggling economy one of the main reasons for the AfD's surging popularity, Merz said his government must tackle economic challenges quickly. But he acknowledged they are proving to be harder to fix than he expected.

"I say this also self-critically, this task is bigger than one or the other may have imagined a year ago," Bloomberg quoted him as saying during a speech in the northern German town of Osnabrueck on Saturday. "We're not just in a period of economic weakness, we are in a structural crisis of our economy."

Experts have blamed Germany's economic woes on high energy costs largely attributed to the Russia-Ukraine conflict, and to the turmoil created by US President Donald Trump's trade tariffs.

Merz said recent data that shows the Volkswagen auto group had a 36 percent slump in second-quarter after-tax earnings was "one of many messages" that indicate the depth of the economic woes in Europe's largest economy, main manufacturer and biggest exporter.

"Large parts of our economy are no longer truly competitive and that's a question of price competitiveness," he said. "The quality is still good and company leaders recognize these challenges. But the underlying conditions in Germany simply haven't been good enough for the last decade."

He has promised to counter the economic challenges with reforms and reduced red tape, as well as modernized infrastructure and moves to stimulate domestic demand. And he said his government must also look at overhauling Germany's large and costly social security system.