Trump's tariffs can help Tesla by hurting rivals more

One global company is likely to suffer more than fewer Tesla than most of its competitors, as President Trump places new tariffs on goods from China and threatens a trade war with allies like Mexico and Canada.

But the electric car maker led by Elon Musk, who accounts for a third of billionaires' wealth, is also vulnerable if relations with China deteriorate. The country is the second largest market after the US and produces more cars than anywhere else.

Tesla has built largely self-sufficient supply chains in the US and China, a rare example in the world of interconnected trade. As a result, tariffs imposed by the Trump administration on Chinese goods and the ongoing threat of putting them on Mexican and Canadian products may help Tesla by hurting their competitors more.

There is no evidence that Musk is shaping a trade policy, but tariffs are one of several measures adopted by the Trump administration that could benefit Tesla at the expense of rivals. On Wednesday, Trump suspended 25% tariffs on most cars and parts made in Canada and Mexico, but US automakers relying on foreign supply chains in a state of uncertainty will expire in a month.

The administration is also trying to eliminate financial support for the construction of fast charging stations for electric vehicles. They are also trying to cut or eliminate the loans and subsidies that competitors, such as Ford Motor and Libian, use to fund electric vehicles and battery plants.

Musk has said nothing about trade or administrative crusades to promote fossil fuels and promote the sale of electric vehicles that could harm Tesla. And his support for Trump influenced protests at Tesla dealers, putting emphasis on Tesla's stock price. But his position as a de facto member of Trump's cabinet has far more impact than other automotive executives.

“Conflicts of interest are here very mildly,” says John Helveston, an assistant professor at George Washington University, teaching engineering management.

Tesla did not respond to requests for comment. White House officials said the policy predated Musk's support for Trump.

“President Trump has consistently denounced Biden's electric vehicle policy that kills Biden's job since the summer of 2023. More than a year before Elon Musk supported President Trump, and since he first ran for president in 2015, he has consistently pressed for building businesses in the US.”

Trade wars and other Trump policies hold Tesla's risks when the company is already in crisis, and sales are plunging in China and Europe despite the overall market for electric vehicles surge.

Musk's widespread investment in China has made him vulnerable due to rising trade tensions between Beijing and the Trump administration.

“He could be a pawn in all of this,” said Ray Singh, an independent car analyst based in Massachusetts, with a focus on China.

Tesla is already struggling in Europe and China due to competition with Chinese electric car manufacturers and a lack of new models. Musk's outrage over political activities, including promotions to far-right parties, has also undermined demand in Germany, the US and other markets. Musk's personal wealth is tied to Tesla stocks, which are falling sharply.

When Tesla launched a mass-produced electric vehicle at its Fremont, California plant in 2012, it designed a supply chain that is less import-independent than virtually all of its competitors. Electric vehicles are a new technology, forcing Tesla to significantly develop sources of their own batteries, motors and other components.

Tesla worked with Panasonic in Japan to build a battery factory in Nevada. It is one of the few automotive companies that are mass-produced in the United States.

When Musk began talking to China about building the factory in 2014, he received a warm welcome from government officials. Tesla opened its factory in Shanghai six years later. Beijing changed its ownership rules so the company can now set up without a local partner. The Chinese government has also secured low interest rate lending, access to top leaders, and even changes Tesla had been seeking emissions restrictions.

But Musk had relatively separate supply chains at its Chinese and US factories, unlike other auto companies that rely heavily on imported parts.

“He was well established when trade was sideways and tariffs were high,” said Michael Dunn, a longtime Chinese automotive consultant. “And that's helping him today.”

Today, cars made in Shanghai are sold in Europe, Southeast Asia, or in the domestic Chinese market, but not in the US.

Cars for sale in the US are made at factories in Fremont and Austin, Texas. Tesla also produces charging equipment in Buffalo, New York, with its own charging network (the country's largest charging network) and regularly tops the annual rankings on online shopping site Cars.com.

“Tesla is in a good position,” and it's in a good position to withstand tariffs,” said Patrick Masterson, who oversees compilation of data that falls into the cars.com rankings. “Their domestic production is robust.”

Tesla remains vulnerable to tariffs on goods from China and Mexico, as quarters of vehicle components and materials measured by value are imported, according to compiled data from the National Highway Traffic Safety Agency. However, electric vehicles built by Tesla competitors are far more vulnerable to tariffs.

For example, General Motors' Chevrolet Equinox Sport Utility vehicles are made in Mexico. The starting price is $34,000, and the battery-powered equinox is a threat to the Tesla Model Y, starting at $45,000 before government incentives. The Trump administration's 25% tariff erases most of its advantages, assuming it stands.

It is difficult to measure the risk to Tesla in China. So far, Chinese leaders appear to be showing Musk's role in the Trump administration positively, viewing him as a potential point of contact. He met Musk in January when China's vice president Han Chang flew to Washington to attend Trump's inauguration.

“The stakes are a great opportunity to learn about the world,” said Ilaria Mazzocco, a senior fellow in China Business and Economics at the Center for Strategic and International Studies, a Washington think tank. “China has hope that he can play a constructive role.”

However, Musk also lost his negotiating power in China.

When Chinese leaders lit their Shanghai factories green, Tesla was seen as a technology leader in promoting the development of the EV industry. However, as sales plummeted in Europe and weakened in China, Tesla production in Shanghai fell 50% from February last year. Chinese automakers such as BYD and Xiaomi are introducing new models that rival Tesla's features such as autonomous driving.

As a result, Tesla's fame and leverage in China could be reduced.

“Tesla has no control over China anymore,” said Jia Xinguang, an independent car analyst in Australia. “But, by contrast, China can control Tesla.”

Still, China probably thinks twice before targeting Tesla and Musk. Because doing so could make it more difficult to attract foreign investment, said Wang Yanghan, a fellow at the Institute of Financial Research at Lenmin University in Beijing, which tracks trade issues. “China doesn't shoot in the leg,” he said. “That's the last option.”

China has so far avoided cars in retaliation against the Trump administration's tariffs on Chinese products, instead raising duties for US agricultural products such as chicken and wheat.

Tesla has quietly fought at least one potential tariff on Chinese materials that directly affect competitiveness.

China is the main source of high-purity graphite, an essential material for batteries. In December, a group of companies seeking to produce battery-grade graphite in the United States denounced the dumping and called for the US International Trade Commission to impose a punitive obligation of more than 800%.

At a hearing on the issue in January, Tesla hired a prominent Washington law firm to argue the case, with four Tesla executives saying in public documents. “We've seen a lot of effort into the development of our products,” said Iola Hughes, director of research at Rho Motion, which tracks the battery industry.

Last month, the trade agency said there were “reasonable signs” that Chinese graphite exports are hurting US producers. The agency has not announced a final decision. Trump's trade rhetoric does not include a reference to graphite.

Joy Dong contributed the report.