Speaking to the German parliament, Merz also said Europe will no longer be cowed by tariff threats, after US President Donald Trump backed away from using such tariffs as a tool to seize Greenland from fellow NATO member Denmark.
Merz's speech underscored how European leaders have been emboldened to try to project European strength and values, after the standoff with Trump over Greenland, global trade ructions and nearly four years of war between Russia and Ukraine.
"For some weeks now, we have been seeing with increasing clarity the emergence of a world of great powers. Rough winds are blowing in this world, and we will feel their effects for the foreseeable future," Merz told MPs.
In recent weeks, "we have been able to experience something of the joy of self-respect", he said, adding that rules-based action and rules-based trade were not dead.
"More and more countries around the world are recognising that the current global reorganisation also presents an opportunity for all actors who prefer rules to arbitrariness and who see more advantages in free and fair trade than in the one-sided pursuit of sole self-interest."
Merz was speaking a week after tensions with Trump came to a head over Greenland, threatening to blow apart the NATO alliance that has underpinned Western security since the end of World War II.
His words echoed those of French President Emmanuel Macron who, in a speech at the World Economic Forum in Davos, Switzerland, said Europe would not give in to bullies.
At the same event, European Commission President Ursula von der Leyen called for a new form of European independence, while Canadian Prime Minister Mark Carney said that in an age of great power rivalry democratic middle powers must build flexible coalitions together.
"Last week, we demonstrated that we in the EU can act swiftly when necessary. We were united in our determination not to be intimidated by tariff threats again," Merz said.
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