The warning came in a recent letter from the US ambassador to Germany seen by the Wall Street Journal.
The US has been lobbying its allies to boycott Huawei due to national security risks.
The firm has pushed back against claims it poses a security threat including suing the US government.
US ambassador Richard Grenell said the US would not be able to keep the same level of co-operation with German security agencies if Germany allowed Huawei or other Chinese firms to participate in its next-generation 5G mobile network, the Wall Street Journal reported.
For details: https://bbc.in/2T1947g