At the same time Beijing is reportedly promising internal reforms to retain access to a vital and necessary U.S. market for Chinese goods, Beijing is threatening Germany if they block Huawei technology from their 5G network China will announce German autos are unsafe for import…. Chancellor Angela Merkel is in a pickle.

According to Bloomberg analysis, German automakers sold approximately seven million cars to China in 2018. The Chinese Ambassador to Germany said this weekend: ” “If Germany were to take a decision that leads to Huawei’s exclusion from the German market, there will be consequences. The Chinese government will not stand idly by.”

(SCMP) […] The Chinese ambassador in Berlin has stirred up a fresh controversy over the tech giant Huawei after he threatened “consequences” if it was excluded from Germany.

Wu Ken’s comments – in which he pointed to the importance of the Chinese market to Germany’s car industry – came amid an intense debate about the company’s role in building 5G networks, which the United States has warned poses a security threat. Chancellor Angela Merkel’s government has been widely accused of bowing to Chinese pressure after she ruled out banning Huawei from the country’s 5G network. Lawmakers from her ruling coalition are seeking to override her decision with a bill that would impose a ban on “untrustworthy” 5G vendors without explicitly naming Huawei. (link)

With Brexit a virtual certainty as an outcome of the recent U.K. election; and with a WTO ruling giving U.S. President Trump a massive $7.5 billion tariff approval against the EU in the Boeing case; and with USTR Lighthizer completing a Section 301 investigation against France resulting in another $2.4 billion in U.S. tariff authority; and with Germany’s economy essentially at a standstill, this latest Chinese threat against Merkel is a perfect storm of negative economic issues.

Germany and France are very precariously positioned against the looming tariffs almost guaranteed by President Trump, and the USMCA content rules for the auto-sector are already going to cause a major supply chain reorientation for German autos sold in the U.S. Overlay the EU climate regulations the nations’ have regulated against their own industry and, well, it doesn’t take a economic analyst to see a future of severe consequence.

This is the background for Beijing’s threat. Essentially China knows Angela Merkel’s economic policies are all coming to bear at the same time the 5G tech issue has risen to the surface of the political debate. Germany has few options, they cannot lose the Chinese market for their auto exports.

Things are about to get very interesting in Europe.

It’s a hot mess worth keeping an eye on…