Elon Musk has become one of Donald Trump’s closest allies and a target for public discontent over his proposed reforms after his victory in the US presidential election. Ironically, Musk’s companies will suffer from Trump’s introduction of higher tariffs on auto components imported into the US, Reuters has learned.
Image Source: Tesla
At the very least, Musk’s Tesla will be unable to begin timely production of Cybercab driverless taxis in Texas and Semi electric trucks, which, although currently being assembled in small batches on a pilot line in Nevada, should only become truly mass-produced after the launch of a full-scale plant nearby, which is scheduled to be built this year, due to tariffs.
As sources explain, Tesla needs components of Chinese origin for mass production of both models of vehicles in the US, and if the company could somehow digest the initial rate of additional duty at 34% with acceptable damage, then further escalation of the foreign trade confrontation with China makes importing the necessary components impractical.
Recall that by April, the rate of the “retaliatory tariff” on Chinese goods imported into the United States had risen to 84% a week ago, and later reached 125%. Taking into account the base rate of 20%, which applies to goods imported from China, the effective value of the duty will be 145%. Tesla was previously supposed to start receiving Chinese components for the launch of pilot production of the Cybercab and Semi in October of this year, with an eye on the start of mass production in 2026, but now it finds itself in disarray due to the level of tariffs set by Trump.
It cannot be said that the threat of a “trade war” has been ignored by Tesla’s management. Over the past two years, the company, as Reuters reports, has been increasing the share of North American components used, but has not been able to completely eliminate imports from China. Deliveries of parts and cars from Canada, Mexico and a number of other countries must be taxed at a rate of 25% when imported into the United States, which in itself will increase the cost of cars on the American market by thousands of dollars. Manufacturers will need some time to localize production, so many imported models will remain expensive for quite a long time.
Tesla had intended to launch the Cybercab driverless taxi into serial production next year and offer it for less than $30,000. Now, not only the project’s timeline is at risk, but also the price of the new product. Elon Musk recently published an unambiguous video explaining that international cooperation is required to produce a simple pencil. It is believed that he has already asked Donald Trump to reconsider the US tariff policy in the foreign trade sphere.
Tesla’s Chinese business has also suffered from retaliatory measures by the Chinese authorities, who have imposed import duties of 125% on American goods. Against this backdrop, Tesla has stopped accepting orders in China for the Model S and Model X, which are assembled exclusively in the United States. In recent years, up to 20% of Chinese auto component exports went to the United States, so it is clear that the new restrictions will harm business in both countries.