Trump lashed out again at USA allies Monday in Twitter messages focusing on "massive trade surpluses" that he said the United States has endured "for decades" with its closest allies.
"I'll tell you very openly and deeply seriously, if we don't manage to form a common response to illegal immigration, then certain foundations of the European Union will be placed in question", Merkel said, citing freedom of movement across the EU's borders.
The decision to remove the USA from the communique set off a strong response from other G7 leaders.
The German leader said she had no idea of Donald Trump's motive for suggesting to revive the G8 format.
She added: "I admit that in some areas we did not achieve what we wanted [at the G-7], but this is not a reason not to talk any longer".
At the same time, she stressed that the current differences does not mean the end of the trans-Atlantic partnership.
However, Merkel avoided giving a definitive answer to the question of whether Germany will stop seeing the United States as an "important partner".
US National Security Advisor John Bolton, who stands next to Trump in the picture, tweeted it during the summit to tout the America First message.
Senior Trump aides escalated the rhetoric on Sunday morning's news shows, with chief economic adviser Larry Kudlow calling Trudeau's remarks "a betrayal" on CNN's "State of the Union" and top trade adviser Peter Navarro saying on "Fox News Sunday" that "there's a special place in hell" for the Canadian leader. "According to a Canada release, they make nearly 100 Billion Dollars in Trade with USA (guess they were bragging and got caught!)". We have a very big trade deficit with Canada.
Other G-7 countries lobbied unsuccessfully at the summit for the U.S.to reverse its tariffs on imported steel and aluminum imports.
Merkel, whose office over the weekend released a photo of her leaning over a table before a seated Trump at a meeting with G7 leaders and aides, said she had "tried hard to find a compromise and we fought hard for it. this was an important announcement".