Tesla is experiencing the impact of President Trump’s tariff policies. The company’s U.S. operations are somewhat protected due to its high level of vertical integration compared to other automakers. However, Tesla’s international business is facing challenges from retaliatory tariffs on car imports. According to Bloomberg, Tesla has halted orders for its premium Model S and Model X vehicles in China, as these are imported. In contrast, the more affordable Model 3 and Model Y are produced locally at Tesla’s Shanghai Gigafactory, shielding them from China’s 125% import tariffs amid ongoing trade tensions.
Luckily for Tesla, the sales of Model S and Model X are relatively low in China, minimizing any significant impact. The company continues to sell existing inventory of these models in the country.
CEO Elon Musk’s close relationship with President Trump is a double-edged sword. While it helps in securing lucrative deals, Musk’s global operations leave him vulnerable to geopolitical conflicts. Musk has openly criticized Trump’s tariff policy. After trade adviser Peter Navarro accused Musk of opposing tariffs due to Tesla’s reliance on imports, Musk defended Tesla’s “American-built” status and disparaged Navarro with a colorful metaphor, while using social media to advocate for free trade. Musk highlighted that some resources, like rare earth metals, are unavailable domestically, challenging Trump’s zero-sum perspective on international trade.
Tesla has the most American-made cars. Navarro is dumber than a sack of bricks. @IfindRetards @RealPNavarro https://t.co/gECgtZt5Sc
— Elon Musk (@elonmusk) April 8, 2025
President Trump has long advocated for tariffs and opposes free trade. Critics argue that while key industries, like semiconductor manufacturing, should be prioritized domestically, this should be achieved through incentives rather than broad tariffs that disproportionately affect low-income Americans. Bringing factories back to the U.S. is a lengthy process, and some economists warn of a potential recession. Products made in the U.S. could become too costly for global competition, and with fluctuating policies, companies may hesitate to invest in domestic production.
The United States has prospered by exporting services like social media and entertainment rather than manufacturing goods. While there are concerns about outsourcing to cheap labor markets, Americans generally do not favor labor-intensive jobs. Retaliatory tariffs illustrate how protectionist measures can disadvantage U.S. companies internationally. The European Union’s openness to more Chinese electric vehicles could threaten American automakers.
President Trump argues that tariffs on foreign goods are necessary to reduce the U.S. spending deficit and prevent a future debt crisis. However, economists suggest alternative fiscal strategies, and note that the trade war has prompted foreign countries to offload U.S. federal bonds, increasing borrowing costs. As a consumer-driven economy, the demand for the U.S. dollar remains a strength.
Other tech companies with Trump-supportive leaders are also vulnerable to conflicts with China. Amazon’s platform is flooded with Chinese products, and Meta earns significant revenue from Chinese advertisers. Apple’s reliance on Chinese manufacturing for iPhones has led to a 20% stock drop, with potential price hikes looming. One analyst estimates a U.S.-made iPhone could cost $3,500.
