Elon Musk at a meeting in the Cabinet Room of the White House on March 24, 2025, in Washington, D.C.
Brendan Smialowski/AFP/Getty Images
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Brendan Smialowski/AFP/Getty Images
President Trump’s newly announced 25% tariffs on imported cars are set to raise vehicle costs significantly for cars sourced from Germany, Japan, and South Korea, alongside U.S.-assembled vehicles that incorporate foreign-made components, as noted by industry experts.
Yet, Tesla, the electric vehicle manufacturer under leadership of Elon Musk, a close adviser to the Trump administration, is anticipated to be among the beneficiaries of this policy, according to industry analysts.
The new tariffs, slated to take effect on April 2, are part of a larger trade conflict initiated at the commencement of Trump’s second term. Upon revealing the tariffs on Wednesday, he stated: “We are imposing a 25% tariff on all cars not manufactured in the U.S. Cars made in the U.S. will incur no tariff at all.”
By these measures, it seems logical to assume that Tesla, producing all its cars in Texas and California, may remain shielded from the tariffs. However, Musk stated on Wednesday via X that this is not entirely the case.
“It’s crucial to understand that Tesla will not escape this impact unscathed. The tariffs will still significantly affect Tesla,” he noted.
Nonetheless, auto industry analyst Daniel Ives from Wedbush Securities remarked, “Tesla is the least affected among U.S. automakers.”
This comes as positive news for Tesla, as the company has encountered declining vehicle sales recently due to consumer dissatisfaction with Musk’s prominent association with government cutbacks and dismantling federal agencies. Such actions have sparked considerable protests at Tesla dealerships and even instances of vandalism against their vehicles and chargers, with U.S. Attorney General Pam Bondi categorizing these acts as “domestic terrorism.”
Tesla’s vehicle sales in the U.S. are projected to decline by 14.5% in the first quarter compared to the last three months of 2024, as indicated by a recent report from Cox Automotive, which also reveals that Tesla has been losing market share to electric vehicle competitors since 2020.
Furthermore, Tesla’s sales have plummeted in Europe, recording a staggering 76% drop in Germany in February, alongside reductions of over 50% in France, Italy, and Portugal, as well as nearly similar declines in Norway and Denmark, according to data from the European Automobile Manufacturers Association. This downturn comes amid a roughly one-third increase in overall EV sales across the continent.
Tesla’s stock value has recently taken a major hit, with a loss of approximately 45% from its peak in December through Thursday’s market close.
Teslas possess ‘considerably more U.S. content’
As Musk pointed out, while Tesla won’t be completely shielded from the tariffs, the company’s Model Y SUV and Model 3 sedan — which are top sellers in the American market — are facing increasing competition from vehicles that may suffer more from the new import tariffs, including the Ford Mustang Mach-E, produced in Mexico, and Hyundai’s Ioniq 5, manufactured both in South Korea and the U.S.
Nonetheless, parts made abroad will also be subject to the new tariffs, with Teslas containing approximately 30% to 40% foreign-sourced components, Ives reports.
“The notion of finding a car that is entirely made in the U.S. with all U.S. parts is unrealistic,” he emphasizes.
Patrick Anderson, principal and CEO of Anderson Economic Group (AEG), concurs that the concept of a wholly U.S.-produced car is nearly non-existent. “All vehicles deemed American are assembled from parts and components sourced from Canada, Mexico, and various other countries,” he states.
However, Anderson acknowledges that Tesla vehicles have “a substantially higher percentage of U.S. content compared to others.”
Retaliatory tariffs could drive prices even higher
Before the announcement of the latest import tariffs on vehicles this week, AEG had estimated in February that 20% tariffs imposed on Chinese steel and aluminum by the Trump administration could inflate some electric vehicle prices by as much as $12,000, according to Anderson.
However, U.S. automakers may face another blow if the tariffs proceed as proposed, according to Ives. “Retaliatory tariffs are a significant concern,” he mentions, referring to potential counter-tariffs from both Europe and Asia.
On the announcement of the new U.S. tariffs, European stock markets experienced a sharp decline, wiping out billions of euros in gains for the year, with automakers in the region particularly affected.
Germany’s Minister of Economic Affairs, Robert Habeck, ominously stated, “It must be made clear that we will not accept this without a response.” Meanwhile, European Commission President Ursula von der Leyen labeled the U.S. tariff decision as “detrimental to businesses and worse for consumers.”
“We anticipate that Canada, Mexico, and likely Europe will implement some form of retaliatory tariffs, as has historically been the case in international trade,” Anderson asserts.
Such retaliatory tariffs would likely lead to increased Tesla prices in several of its crucial foreign markets. For instance, the company recorded a record sale of 657,000 vehicles in China in 2024, constituting 8.8% of its overall sales. In Canada, Tesla sold an estimated 46,000 vehicles in 2024, a rise from 2023.
Should other countries choose to impose retaliatory tariffs, it is clear that Tesla “will face adverse effects,” as time progresses, states Ives.
