President Trump is slapping 25% tariffs on all cars imported to the United States, including from our immediate North American neighbors. He’s also placed a 25% tariff on certain parts used to build cars. It’s a decision that will likely supercharge the cost of new and used cars, but it’s also a gift to Tesla, the company run by Elon Musk, his biggest financial supporter in the presidential election.
The new tariff regime comes at an auspicious time for Tesla. The company is dealing with the fallout of Musk’s promotion of far-right ideology and his involvement with the unpopular Department of Government Efficiency, which has sparked protests around the world. Tesla has recently relied on promotions and price cuts to boost sales, and yet it still sold fewer EVs in 2024 than it did in 2023 and is off to a rough start in 2025.
New tariffs could shift that calculus, at least in the U.S. Tesla builds all of its cars destined for the North American market in the U.S. at factories in Fremont, California, and Austin, Texas. That means none of the cars it sells in the U.S. will be subject to the 25% vehicle import tax.
Tesla does import around 20% to 30% of the components used to build those cars, so that will cause some headache. Musk admitted on X that Tesla is “NOT unscathed” by these tariffs and claimed they will have a “significant” impact. But the company’s long-standing effort to establish local supply chains near its factories is now being rewarded.
Essentially every other automaker is in a worse position than Tesla, and the tariffs will especially affect competing EVs. Around 80% of the cars Ford sells in the U.S. are built domestically. But it makes the all-electric Mustang Mach-E and the popular (and far more affordable) Maverick hybrid pickup truck in Mexico.
General Motors, meanwhile, builds its Blazer and Equinox EVs in Mexico. Hyundai has found increasing success with its electric vehicles in the U.S. market, but nearly all of those are built in South Korea.
Much like Tesla, upstart electric automakers like Rivian and Lucid Motors won’t have to worry about the vehicle import tariffs because they make their EVs in Illinois and Arizona, respectively. Like Tesla, they import parts that will be subject to tariffs — but they are in a worse position to absorb those costs since both companies are still losing buckets of money on every EV they sell.
This sets up a scenario where other EVs may see price increases greater than any Tesla might implement. That price separation could become even more of a boon to Tesla when it rolls out its mysterious new lower-cost EV this year — something the company has said will happen in the next few months.
Of course, Trump announced these tariffs after weeks of waffling on whether he would implement them in the first place. The president has claimed these will be “permanent.” But like so many other things he proposes, that could always change.
