Germany is learning the hard way: You can’t depend on authoritarian regimes and autocracies for economic security. Or any other kind of security for that matter.

In 2022, the world’s fourth-largest economy briefly found itself staring into the abyss amid an existential spiral in natural gas prices that threatened to shut down German industry.

That was thanks to the war in Ukraine and Russia’s efforts to weaponize energy in retaliation for Western economic sanctions, which amounted to the weaponization of G7 financial claims.

The familiar figure above illustrates the point. Not that it needs reiterating by now.

Although the energy crunch abated, Germany is still grappling with the perils of economic dependency vis-à-vis autocrats. With that in mind, the Bundesbank this week issued a stark warning:

These last few years revealed the risk to economic development that emanates from strong, one-sided dependencies on primary products from abroad. There is still a need to reduce dependencies on China, particularly for primary products that are challenging to replace.

Narrowly, the context is Germany’s ongoing “slowcession.” The country is mired in what I’ve (aptly) described as an interminable malaise, defined by sluggish growth and elevated inflation, a reflection of (and a major contributor to) the EU-wide stagflationary doldrums.

China is, of course, a major export market for Germany, but as the Bundesbank emphasized, China is also a key source of critical imports for nearly a third of German companies.

Simply put: The conjuncture illustrated above isn’t tenable in the current geopolitical environment. It suggests China, like Russia, could tank the German economy in the event of an armed conflict with the West.

Just last week, Beijing chafed at an EU probe into Chinese EV subsidies, calling the investigation “blatant protectionism.” “Global markets are now flooded with cheaper Chinese electric cars and their price is kept artificially low by huge state subsidies,” Ursula von der Leyen declared.

The ironies are so many as to elude satire — the jokes write themselves. Von der Leyen, Germany’s former defense minister, is spearheading a probe which, as Politico was keen to point out this week, could end up hurting Germany’s export-led economy the most due to the country’s automakers which are “heavily invested in, and exposed to, China.”

France, which pushed for the probe, insists Paris isn’t trying to give its own automakers a leg up on German manufacturers, but as the same linked article put it, “the prospect of a boomerang effect in which potential retaliation by China hits Germany hardest can’t be discounted.”

Updated OECD projections released on Tuesday showed the German economy will likely contract this year, and will grow just 0.9% in 2024, nearly two percentage points below G20 growth and 0.3pp below G20 advanced economies.