BERLIN (Reuters) - Chancellor-in-waiting Friedrich Merz called on Monday for swift action to secure Germany's competitiveness in response to sliding stock and bond markets, following U.S. President Donald Trump's announcement of sweeping tariffs.

Major stock indexes plunged on Monday as Trump showed no sign of backing away from his tariff plans, and investors bet the mounting risk of recession could see the Federal Reserve cutting interest rates as early as May.

"The situation on the international equity and bond markets is dramatic and threatens to deteriorate further. It is therefore more urgent than ever for Germany to restore its international competitiveness as quickly as possible," Merz said in an emailed statement to Reuters.

"This issue must now be at the centre of the coalition negotiations," he added of his conservative bloc's talks to form a government with the Social Democrats, repeating his party's calls for tax cuts, a reduction in red tape and lower energy prices.

Together with other European Union countries, Germany faces 25% import tariffs on steel and aluminium and cars, and "reciprocal" tariffs of 20% from Wednesday for almost all other goods.

The tariffs only add to trade-sensitive Germany's economic headache, muddying attempts by the prospective coalition government to haul Europe's largest economy out of a two-year-long recession.

Germany's benchmark index was among the worst hit markets in the euro area on Monday, opening some 10% lower before recovering some of those losses.

The Sentix survey of euro zone investors showed sentiment tumbling to its lowest point in more than a year in April, as trade war fears eclipsed the initial excitement over a massive boost in public spending planned under Merz.

Germany's likely future leader has taken a stern tone with Trump and stressed that Europe must reduce its reliance on Washington when it comes to defence.

The European Commission is seeking to coordinate a joint response to the tariffs on behalf of EU countries including Germany.