On the 26th (local time), the Donald Trump administration imposed a 25% tariff on foreign cars imported into the United States, and evaluations suggest that Tesla, led by Elon Musk, a close associate of President Trump, will not be significantly affected.
On the 26th (local time), The New York Times (NYT) reported, "Tesla could benefit from the automobile tariff announced by President Trump and may suffer less than competitors," adding, "This is because Tesla produces all cars sold in the U.S. in California and Texas."
The reason Tesla is expected to benefit is that the tariff is imposed primarily on finished cars. The White House stated that tariffs will apply to major auto parts such as engines and transmissions, but parts that meet the standards of the United States-Mexico-Canada Agreement (USMCA) will remain duty-free for a while.
Like other automakers, Tesla sources many of its parts from overseas; however, it assembles all cars sold in the United States at its domestic plants. Tesla's SUV (sports utility vehicle) model 'Model Y' and sedan model 'Model 3' were also the two best-selling electric vehicles in the U.S. last year.
In contrast, General Motors (GM) assembles only about 60% of the vehicles sold in the U.S. domestically. Ford also produces just 80% of its total vehicles in the United States. The popular GM SUV model, the Chevrolet Blazer 2024, uses an engine and transmission made in the U.S. but is assembled in a factory in Mexico.
President Trump appeared to anticipate criticism regarding Tesla's benefits, stating, "(Musk and I) may have a conflict of interest, so we do not discuss (business-related matters)," and noted, "He has never made any requests regarding business matters, which is surprising to me." He added, "Musk has never made any requests to me concerning policies mandating electric vehicles."
Tesla's rising production expenses are inevitable, but the impact is expected to be less than that on competitors. NYT noted, "The White House has stated that U.S. parts in vehicles assembled in Mexico or Canada will be exempt from tariffs, so the exact impact is unclear," adding, "GM's Chevrolet Equinox EV and Ford's Mustang Mach-E are all produced in Mexico and have significantly more imported components, making them considerably more expensive than Tesla's vehicles."
Among foreign automotive corporations, Volkswagen is expected to be the hardest hit. Volkswagen produces the Atlas SUV and ID.4 electric vehicle in Chattanooga, Tennessee, but relies on its Mexican plant for sedan models like the Jetta. Audi, under Volkswagen, produces vehicles for the U.S. market in Mexico, while Porsche, also under Volkswagen, sources all of its cars from Europe.
Other foreign corporations have factories in the U.S., allowing them to partially avoid tariffs on imported finished cars. BMW has a plant in South Carolina, Toyota in Kentucky and several other states, Nissan in Tennessee, Mercedes-Benz in Alabama, and Honda in Indiana and Ohio. Hyundai also operates a plant in Alabama and completed a plant in Georgia on the same day to produce electric vehicles in the U.S.