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As President Trump puts new tariffs on goods from China and threatens a trade war with allies like Mexico and Canada, one global company is likely to suffer less than most of its competitors: Tesla.<\/p>\n
But the electric car maker led by Elon Musk, which accounts for a third of the billionaire\u2019s wealth, is also vulnerable if relations with China worsen. That country is the company\u2019s second-largest market after the United States and it produces more cars there than anywhere else.<\/p>\n
Tesla has built largely self-sufficient supply chains in the United States and China, a rarity in a world of interconnected trade. As a result, the tariffs imposed by the Trump administration on Chinese goods, and the continuing threat to put them on Mexican and Canadian products, might help Tesla by hurting its competitors more.<\/p>\n<\/div>\n<\/div>\n
Although there is no evidence that Mr. Musk is shaping trade policies, the tariffs are one of several measures adopted by the Trump administration that may benefit Tesla at the expense of its rivals. On Wednesday, Mr. Trump paused 25 percent tariffs<\/a> on most autos and parts made in Canada and Mexico, but the reprieve expires in a month, leaving automakers in the United States that depend on foreign supply chains in a state of uncertainty.<\/p>\n<\/div>\n<\/div>\n The administration is also trying to eliminate financial support for the construction of fast-charging stations for electric vehicles, a move that could handicap companies seeking to compete with Tesla\u2019s extensive network. And it is attempting to cut or eliminate loans and subsidies that competitors like Ford Motor and Rivian are using to finance electric vehicle and battery factories.<\/p>\n Mr. Musk has said next to nothing about trade or the administration\u2019s crusade to promote fossil fuels and impede sales of electric vehicles, which could also hurt Tesla. And his support of Mr. Trump has inspired protests at Tesla dealerships and weighed on Tesla\u2019s share price. But his position as a de facto member of Mr. Trump\u2019s cabinet gives him influence that far exceeds any other auto executive.<\/p>\n \u201cConflict of interest is putting it very mildly here,\u201d said John Helveston, an assistant professor at George Washington University who teaches engineering management.<\/p>\n Tesla did not respond to a request for comment. A White House official said that its policies predated Mr. Musk\u2019s support for Mr. Trump.<\/p>\n<\/div>\n<\/div>\n \u201cPresident Trump consistently slammed Biden\u2019s job-killing electric vehicle policies on the campaign trail since summer 2023 \u2014 more than a year before Elon Musk even endorsed President Trump \u2014 and he has consistently pressed companies to have their products be made in America since he first ran for president in 2015,\u201d Kush Desai, a White House spokesman, said in an email.<\/p>\n The trade war and other Trump policies also hold risks for Tesla when the company is already in crisis<\/a>, with sales plummeting in China and Europe even as the overall market for electric vehicles is surging.<\/p>\n Mr. Musk\u2019s extensive investments in China leave him vulnerable as trade tensions between the Chinese government and the Trump administration rise.<\/p>\n \u201cHe could become a pawn in all of this,\u201d said Lei Xing, an independent auto analyst based in Massachusetts who is focused on China.<\/p>\n<\/div>\n<\/div>\n Tesla is already struggling in Europe and China because of competition from Chinese electric carmakers and a dearth of new models. Anger over Mr. Musk\u2019s political activities<\/a>, including promotion of far-right parties, has also hurt demand in Germany, the United States and other markets. Mr. Musk\u2019s personal wealth is tied up in Tesla stock, which has been on a steep decline.<\/a><\/p>\n When Tesla began mass-producing electric cars at a factory in Fremont, Calif., in 2012, it designed a supply chain that was less dependent on imports than virtually all of its competitors. Electric vehicles were a new technology then, forcing Tesla to largely develop its own sources of batteries, motors and other components.<\/p>\n<\/div>\n<\/div>\n Tesla built a battery factory in Nevada in partnership with Panasonic of Japan, and it remains one of just a few car companies to mass-produce batteries in the United States.<\/p>\n When, in 2014, Mr. Musk began talking about building a factory in China, he received a warm welcome from government officials. Tesla opened a factory in Shanghai six years later under unusually favorable conditions<\/a>. Beijing changed ownership rules so that the company could set up without a local partner, a first for a foreign automaker in China. The Chinese government also ensured low-interest loans, access to top leaders and even changes that Tesla had sought on emissions regulations.<\/p>\n<\/div>\n<\/div>\n But Mr. Musk kept supply chains for the Chinese and U.S. factories relatively separate, unlike other auto companies that depend heavily on imported parts.<\/p>\n \u201cHe set himself up nicely in the event that trade goes sideways and tariffs go higher,\u201d said Michael Dunne, a longtime China automotive consultant. \u201cAnd that serves him well today.\u201d<\/p>\n Today, the cars made in Shanghai are sold in Europe, Southeast Asia or in the domestic Chinese market \u2014 but not in the United States.<\/p>\n The cars Tesla sells in the United States are made at factories in Fremont and Austin, Texas. Tesla also produces charging equipment for its proprietary charging network \u2014 the nation\u2019s largest \u2014 in Buffalo, N.Y. Tesla regularly tops an annual ranking by Cars.com, an online shopping site, of how much of a vehicle is American-made.<\/p>\n<\/div>\n<\/div>\n \u201cTesla is in a good position\u201d to withstand tariffs, said Patrick Masterson, who oversees compilation of the data that goes into the Cars.com ranking. \u201cTheir domestic production is robust.\u201d<\/p>\n Tesla is still vulnerable to tariffs on goods from China and Mexico because a quarterof the components and materials in the car, measured by value, is imported, according to data compiled by the National Highway Traffic Safety Administration. But electric vehicles made by Tesla\u2019s competitors are much more vulnerable to tariffs.<\/p>\n General Motors\u2019 Chevrolet Equinox sport utility vehicle, for example, is made in Mexico. With a starting price of $34,000, the battery-powered Equinox is a threat to the Tesla Model Y, which starts at $45,000 before government incentives. The Trump administration\u2019s 25 percent tariff will erase most of that advantage, assuming it stands.<\/p>\n The risk to Tesla in China is harder to gauge. So far, Chinese leaders appear to see Mr. Musk\u2019s role in the Trump administration as a plus, viewing him as a potential point of contact<\/a>. In January, when Han Zheng, China\u2019s vice president, flew to Washington to attend Mr. Trump\u2019s inauguration, he met with Mr. Musk.<\/p>\n<\/div>\n<\/div>\n \u201cU.S.-China policy often has operated through specific personal relationships,\u201d said Ilaria Mazzocco, a senior fellow in Chinese business and economics at the Center for Strategic and International Studies, a Washington think tank. \u201cThere is hope in China that he could play a constructive role.\u201d<\/p>\n But Mr. Musk has also lost some bargaining power in China.<\/p>\n When Chinese leaders greenlighted the Shanghai factory, Tesla was seen as a technology leader that would spur development of the E.V. industry. With sales plummeting in Europe and weakening in China, however, Tesla production in Shanghai fell 50 percent in February from a year earlier. Chinese automakers like BYD<\/a> and Xiaomi<\/a> are introducing new models that rival Tesla in features like autonomous driving.<\/p>\n Tesla\u2019s prestige and leverage in China may be diminished as a result.<\/p>\n \u201cTesla can no longer control China,\u201d said Jia Xinguang, an independent automotive analyst in Australia. \u201cBut China, by contrast, can control Tesla.\u201d<\/p>\n Still, China would probably think twice before targeting Tesla and Mr. Musk because doing so could make it more difficult to attract foreign investment, said Wang Yanhang, a fellow at the Chongyang Institute for Financial Studies at Renmin University in Beijing who tracks trade issues. \u201cChina will not shoot itself in the foot,\u201d he said. \u201cIt is the last option.\u201d<\/p>\n<\/div>\n<\/div>\n China has so far steered clear of autos when retaliating against the Trump administration\u2019s tariffs on Chinese goods, instead raising duties on U.S. agricultural products<\/a> like chicken and wheat.<\/p>\n Tesla has quietly fought at least one potential tariff on Chinese materials that would have a direct impact on its competitiveness.<\/p>\n China is the main source of high-purity graphite, an essential material for batteries. In December, a group of companies that are trying to produce battery-grade graphite in the United States accused China of dumping and asked the U.S. International Trade Commission to impose punitive duties that could be more than 800 percent.<\/p>\n At a hearing on the issue in January, Tesla hired a prominent Washington law firm to argue its case, and four Tesla executives spoke, according to public documents<\/a>. Tesla is \u201cpushing back because they don\u2019t see an alternative to the Chinese graphite,\u201d said Iola Hughes, head of research at Rho Motion, which tracks the battery industry.<\/p>\n Last month, the trade agency said there was a \u201creasonable indication\u201d that Chinese exports of graphite were harming U.S. producers. The agency has not issued a final decision. Mr. Trump\u2019s rhetoric on trade has not included any mention of graphite.<\/p>\n Joy Dong contributed reporting.<\/p>\n<\/div>\n<\/div>\n