Shares of Tesla (NASDAQ: TSLA) climbed higher today. The electric vehicle (EV) maker’s stock gained 4.7% as of market close, but was up as much as 7.8% earlier in the day. The jump comes as the S&P 500 (SNPINDEX: ^GSPC) lost 0.1% and the Nasdaq Composite (NASDAQINDEX: ^IXIC) was flat.
President Trump signaled he wanted to lower trade tensions between the U.S. and China ahead of key talks between the two countries.
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Trump signals potential tariff reduction
President Donald Trump proposed cutting tariffs on goods from China ahead of critical talks between the two superpowers. Writing on social media Friday, Trump said that “80% Tariff on China seems right.” While these would still be very high, they represent a significant reduction from the current 145% tariffs implemented in April.
The upcoming trade talks between U.S. Treasury Secretary Scott Bessent and China’s Vice Premier He Lifeng in Switzerland will have major impacts on global markets. Echoing Trump’s positive tone, China’s Vice Foreign Minister Hua Chunying said that Beijing had “full confidence” in its ability to manage trade issues with the U.S.
Image source: Getty Images.
Tesla’s complex business
While Tesla’s model insulates it from some of the direct effects of tariffs, at least compared to many of its competitors, they are still a threat to the company’s bottom line. Tesla has manufacturing sites locally in the U.S. and China, allowing it to avoid direct levies on some of its models. Its supply chain, however, is much more exposed. The tariffs raise costs across the whole business.
It’s a critical time for Tesla, as it faces increased competition from rival EV makers and its sales erode globally. I continue to think the stock is overvalued.
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Johnny Rice has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.
