Tesla (Nasdaq: TSLA) CEO Elon Musk said on Wednesday that President Donald Trump’s new 25% tariff on imported vehicles and parts will significantly impact his company, directly contradicting Trump’s claim that the electric vehicle maker would benefit from the “America-first” measure.
“To be clear, this will affect the price of parts in Tesla cars that come from other countries. The cost impact is not trivial,” Musk wrote on X hours after Trump announced the tariffs.
Trump unveiled the new duties on Wednesday, set to take effect April 2, as part of his broader trade agenda. The tariffs will be on top of existing import duties and apply to vehicles manufactured outside the United States, with partial exemptions for cars assembled in Canada and Mexico under the USMCA trade agreement.
During the announcement, Trump suggested Tesla would gain from the policy because of its domestic manufacturing footprint. “It could be a net neutral, or they may be good. He has a big plant in Texas, he has a big plant in California, and anybody who has plants in the United States, it’s going to be good for, in my opinion,” Trump said.
Analysts agreed that while Musk is right about cost not being trivial, Dan Ives of Wedbush Securities noted Tesla faces reduced exposure “as their production and assembly (for US vehicles) is all in the US.” George Gianarikas from Canaccord Genuity told Yahoo that compared to competitors, Tesla stands “pretty well insulated” from these tariffs, though he acknowledged “there will be an impact without a doubt, depending on what it is.”
Earlier this month, Trump gathered several leading automotive executives for discussions where he explicitly warned against raising vehicle prices in response to tariffs, according to sources cited by The Wall Street Journal. The newspaper reported that Trump suggested his administration would view price increases unfavorably, creating anxiety among executives who feared potential repercussions.
“You’re going to see prices going down, but going to go down specifically because they’re going to buy what we’re doing, incentivizing companies to — and even countries — companies to come into America,” Trump said during Wednesday’s announcement.
Auto industry leaders have widely rejected the possibility of absorbing the substantial costs without adjusting consumer pricing. In correspondence to staff on Tuesday viewed by The Journal, Ray Scott, who leads parts manufacturer Lear, wrote that tariffs cannot be absorbed at any level and that coordinated industry action would be necessary to address their impact.
Morgan Stanley analysts predicted in a Thursday note that once dealerships exhaust their current two to three-month inventory stockpiles around May, vehicle prices will likely rise 11% to 12% as manufacturers pass on tariff costs.
“It is difficult to see how imposed tariffs over time would not have some impact on prices,” said Matt Blunt, who heads the automotive advocacy organization representing General Motors (NYSE: GM), Stellantis (BIT: STLAM), and Ford (NYSE: F).
Musk, a senior Trump advisor, also feels the impact of the tariffs elsewhere. Canada recently suspended approximately $43 million in what they described as “suspicious” electric vehicle incentives and barred the company from future EV subsidy programs — actions taken explicitly to counter Trump’s earlier trade measures.
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