U.S. President Donald Trump has announced a new 25% tariff on all foreign-made vehicles imported into the United States. The tariffs, which are set to take effect April 2, will result in a significant financial hit for many automakers, and while Tesla builds its car in the U.S., it won’t escape from the tariff unscathed.
Tesla is the only major automaker selling in the U.S. whose entire vehicle lineup is manufactured domestically. That gives it an immediate edge over competitors like Toyota, Volkswagen, and Hyundai, all of whom rely heavily on imports and now face steep price increases or significant impacts on their margins if they try and swallow the cost of the tariff.
However, despite Tesla’s domestic production and the fact its cars are the most American-made, CEO Elon Musk was quick to point out that advantage is not as clear as it appears.
“Important to note that Tesla is NOT unscathed here. The tariff impact on Tesla is still significant,” Musk posted on X in response to a post saying Tesla could benefit most in the face of the new tariff.
This is because the company’s supply chain is not 100% domestic, and many of the vehicle parts come from outside the U.S. “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 said in a follow-up post.
For legacy automakers, the 25% tariff could be financially devastating. Companies like Stellantis, Nissan, and GM produce a significant portion of their U.S.-bound vehicles in Canada, Mexico, and Asia.
While Tesla may not be impacted as much from the tariffs as other automakers, the company could also be impacted by collateral damage. The United Kingdom, the second-largest exporter of vehicles to the U.S. after the European Union, is currently considering a review of government subsidies currently benefitting Tesla as part of a broader rethink of EV incentive programs as a direct result of the new tariff.
“We are looking at the zero emission vehicle mandate which is why some of… that money goes to Tesla, and looking at how we can better support the car manufacturing industry in the UK,” UK Finance Minister Rachel Reeves said. (via Reuters)
