Why Elon Musk’s Tesla will be less of a loser from Trump’s car tariffs
Although Tesla may gain a competitive advantage with sales in the US, it faces mounting challenges globally
Elon Musk has warned that Tesla will not escape the impact of sweeping new US auto tariffs, but the electric car maker could still gain a competitive edge over its rivals.
On Wednesday, Donald Trump announced a 25 per cent tariff on all non-US-made vehicles and parts, set to take effect on 2 April. The move, aimed at protecting American manufacturers, is expected to disrupt supply chains, drive up production costs and raise car prices across the board.
However, Tesla’s reliance on America-based production could shield it from the worst of the fallout. The company manufactures all the cars it sells in the US at its factories in California and Texas, meaning its vehicles will be exempt from the new tariffs.
While Tesla will still face higher costs due to levies on imported motors, batteries and raw materials, its US production offers a significant advantage over competitors with heavier exposure to foreign manufacturing.
“Important to note that Tesla is NOT unscathed here. The tariff impact on Tesla is still significant,” Musk posted on X, which he owns.
Tesla’s edge over US competitors
Tesla’s rivals are bracing for a more severe fallout. Volkswagen, one of the most exposed automakers, produces some vehicles in Tennessee. However, it relies heavily on Mexican factories for models such as the Jetta. Its Audi division also imports vehicles from Mexico and Europe, which will now face steep tariffs.
Hyundai and Toyota, both of which ship hundreds of thousands of cars from Asia to the US each year, will be hit particularly hard. Meanwhile, Ford, which builds its popular F-series pickups at several US manufacturing sites, could gain a similar advantage to Tesla over General Motors, which manufacture many of their trucks in Mexico.
Although Tesla imports some parts, its rivals’ greater dependence on foreign production makes them more vulnerable to rising costs.
Tesla benefits from government support
Trump insisted on Wednesday that Musk had no influence over the tariff decision, but the two have a history of mutual admiration.
“He’s never asked me for a favour in business whatsoever,” Trump said at the White House.
Just last week, the president was outside the White House admiring a row of five Teslas parked in front of the press, reeling off their prices like an auctioneer.
“That’s beautiful… that one,” Trump said. “I’ll give him a cheque. I do it the old-fashioned way… and I don’t want a discount.”
Musk’s Tesla is no stranger to government handouts. Tesla has long benefited from government support. The company received $11.4bn in regulatory credits through federal and state programmes designed to promote electric vehicle (EV) production, according to The Washington Post.
Under Trump’s administration, Tesla may also gain from a potential $400m government contract to supply armoured electric vehicles for US diplomats.
Trump’s tariffs likely to hit consumers
While Tesla may gain a competitive advantage via the tariffs, the broader auto industry is bracing for higher costs.
Tariffs on vehicles and parts will increase production expenses, possibly forcing automakers to raise prices worldwide.
Analysts estimate that new car prices could rise by thousands of dollars, making vehicles unaffordable for many Americans.
In the EV sector, Tesla could become a more attractive option compared with foreign-made rivals such as BMW and Hyundai, whose models will now carry heftier tariffs due to importing more parts from outside the US.
However, outside the US, Tesla’s outlook appears far less certain. Musk’s increasingly recent far-right pivot and infamous Nazi salute has damaged the brand’s reputation in Europe.
In Germany, Tesla sales have plunged by 70 per cent in recent months, while the company faces growing protests abroad, and cars have been torched as anger mounts against Musk’s antics. Retaliatory tariffs from other nations are also expected, adding further pressure on Tesla.
Although Tesla may gain a competitive advantage with sales in the US, it faces mounting challenges globally. With its stock continuing to tumble, Musk’s own erratic behaviour risks becoming the company’s biggest liability.
