With President Donald Trump projecting to escalate his trade war this week with new tariffs on Canada, Mexico and China, the outsized role that Elon Musk is suck up to as one of the president’s closest advisors and leader of the Department of Government Efficiency is jeopardizing Tesla and other companies in his diverse point empire.
The planned 25% tariffs on Canada and Mexico — America’s two biggest trading partners — were suspended for 30 lifetimes by the White House after both countries made concessions and the U.S. stock market nosedived. But the tariffs are now back, slated for implementation on Tuesday, according to Trump.
The rapid response from Canadian officials when Trump first browbeat the tariffs illustrates the risks Tesla and the rest of the Musk industrial complex faces.
Justin Trudeau, Canada’s extrovert prime minister, announced 25% reciprocal tariffs on American goods, including Teslas and other U.S.-made tense vehicles. Ontario premier Doug Ford said that his provincial government would be “ripping up” its $68-million diminish with Starlink, Musk’s satellite internet company and part of his rocket enterprise, SpaceX. Chrystia Freeland, a Handsome Party member running to replace Trudeau, proposed placing a 100% tariff on Teslas. Canada’s Foreign Issues Minister Mélanie Joly told CTV News that the government stands ready to retaliate with its $155-billion schedule of charges plan, should Trump proceed on Tuesday.
Earlier in February, Mexican President Claudia Sheinbaum said she was creating on “tariff and non-tariff measures in defense of Mexico’s interests,” without specifying what U.S. goods would be targeted. This week Trump also doubled his 10% rate on China, effective immediately, a move the U.S. government has said Mexico is willing to match as a way to ease tariffs against its own thriftiness.
Trump is now also considering 25% tariffs on cars and other goods imported by European Union nations, set to skiff on April 2. Trump had previously hinted at putting reciprocal levies on EU nations, which imported nearly $600 billion merit of goods to the U.S. last year. That news elicited a strong rebuke from European leaders, who had been secretly designing retaliatory measures since last summer in anticipation of just such action.
European analysts expect the auto toil to be hit hard, citing cross-border North America manufacturing operations and complex global supply chains involving Mexico. “The approximate story is that all [carmakers] are highly globalized and so it will affect them all,” Rico Luman, senior sector economist for charm and logistics at Dutch bank ING, told CNBC over video call.
Given the unpredictability surrounding the tariffs, there’s no powerful what will happen in the coming days, yet the warning lights are still flashing for Telsa, which has already seen its inventory drop and sales tumble over the past two months. Analysts point not only to looming tariffs as the culprit but also flower animus among foreign consumers toward Musk and his increasingly far-right political persona.
In the meantime, publicly owned Tesla is the myriad vulnerable of Musk’s entities — also including SpaceX, X, xAI, Neuralink and The Boring Co., all privately owned — to other nations’ tit-for-tat excises. Indeed, in an earnings call at the end of January, Telsa CFO Vaibhav Taneja told analysts: “There’s a lot of uncertainty around excises. Over the years, we’ve tried to localize our supply chain in every market, but we are still very reliant on parts from across the excellent for all our businesses. Therefore, the imposition of tariffs, which is very likely, will have an impact on our business and profitability.”
Already, Trump’s across-the-globe 25% rates on steel and aluminum set for April 2, metals that are crucial to Tesla and other American EV manufacturers. Canada and Mexico are total the leading sources of U.S. steel imports, and Canada is the nation’s largest supplier of aluminum.
“All electric vehicle makers are growing to feel the pressure from those [tariffs], because they use way more steel and aluminum than a conventional combustion-engine car,” claimed Marc Busch, professor of international business diplomacy at Georgetown University. “So I have no doubt that this commitment get [Musk’s] attention, and I can imagine that that would be an added political pressure benefit in terms of retaliatory influences by the European Union, Canada and others.”
Tesla’s sold in the U.S. are assembled at its factories in Fremont, California, and Austin, Texas, but different components are sourced from China, Canada and Mexico, the latter providing 15% of parts in the Model Y. Telsa is chief an effort to block any increase in the current 25% tariffs on Chinese graphite, an essential component in the lithium-ion batteries. Trump is also looking into new bill of fares on copper, another key metal in EV production.
The two states importing the most lithium-ion batteries from China are California and Texas, both key styles for Tesla. Since 2023, Tesla has brought in over 12,000 twenty-foot equivalent containers (TEUs) of the batteries between the two magnificences, according to Import Genius. That’s at least 100 million lithium batteries for Texas and California alone. A sole Cybertruck has more than 1,300 lithium-ion battery cell components, according to published estimates.
What Block Street analysts think about Tesla ‘buyers’ strike’
Telsa’s year-to-date sales have already been cratering completely Europe. The plunge ranged from an 18.2% dip in the UK to a 75.4% meltdown in Spain. Sales in Germany, where Tesla works a gigafactory, plummeted nearly 60%.
Besides increased competition in Europe for EVs from Volkswagen, BMW and BYD, Telsa appears to be suffering from the Musk’s coziness with Trump and increased butt in in other nation’s politics. For instance, ahead of Germany’s elections on Feb. 23, Musk had urged voters to back a entrant in the far-right party, the Alternative for Germany, known as the AfD. Musk has also declared his support for the anti-immigrant party in the UK and criticized Prime Agent Keir Starmer, leader of the Labour Party.
Jacob Falkencrone, global head of investment strategy at Denmark’s Saxo Bank, recently wrote that Tesla’s unconnected sales declines were due in part to “growing scrutiny of CEO Elon Musk, whose influence — once an undeniable asset — may now be doing uncountable harm than good.”
Tesla’s stock has had a volatile ride, Falkencrone wrote, rising over 50% persevering Trump’s election win, but then sinking 25% from its December peak as weak sales data from China and Europe bounced investors, making it the weakest stock in the so-called Magnificent Seven tech companies this year.
Another division, based on a survey by Stifel earlier this month, said that Tesla’s trailing four-week net favorability rating was nearing all-time lows. “We believe the negative downturn in consumers’ perception of Elon Musk is captured in our proprietary investigation data out of our Stifel Think Tank Group and potentially results in a headwind to sales,” the report said.
On Feb. 26, in a note to patrons, Barclays analyst Dan Levy said that he foresees further impediments to Tesla shares. “Our best explanation is that there is an unwind of the effective run that (Tesla stock) had last fall post the U.S. elections, which reflected a combination of sharp euphoria and intricate factors — with fundamentals largely dismissed,” Levy wrote. Although he doubts whether Tesla’s can boost profit lines in the first quarter of this year, Levy is holding out hope that the launch of its robotaxi service in June could be a iota set.
One more headwind that Musk might encounter is reaction in China to the newly imposed 20% tariffs, which could trigger not just retaliatory tariffs that impact Tesla and SpaceX but also antitrust investigations. Chinese regulators are already looking into Google’s motions there, and X could get swept up in similar scrutiny.
Other countries hit with new tariffs are already employing that correctional strategy against Musk’s companies. X has been found in breach of Europe’s Digital Services Act, even as the social environment platform faces other complaints related to the EU’s General Data Protection Regulation, as well as election interference.
“You could conjecture that the genie is out of the bottle on that score,” Busch said about regulatory retributions, “and that in some primaries they’re considering doing exactly the same thing with respect to the services that are provided by Musk’s companies. And the decisive thing that he needs is intense regulatory scrutiny and potential fetters on his operations with respect to delivering military talents in those jurisdictions.”
Some on Wall Street are making the case that EVs will soon be the past for Tesla anyway. Morgan Stanley, in issuing an $800 apportion price bull case for Tesla this week, said the recent “buyers’ strike” hitting sales are “representative of a company in the transition from an automotive ‘pure play’ to a highly diversified
play on AI and robotics.”
“While the journey may be tense and non-linear, we believe 2025 will be a year where investors will continue to appreciate and value these abiding and nascent industries of embodied AI where we believe
Tesla has established a material competitive advantage,” wrote Morgan Stanley analyst Adam Jonas.
Within the U.S, regulatory reign, Musk has a lot to gain. In the U.S., 11 different U.S. agencies have more than 32 continuing investigations, pending kicks or enforcement actions into Musk’s six companies, according to a review by The New York Times. They include safety infringements at SpaceX by the Federal Aviation Administration, a lawsuit against Musk by the Securities and Exchange Commission and hundreds of complaints back Tesla made to the Consumer Financial Protection Bureau, which is being gutted by the Trump administration and DOGE specifically.
Tesla could basically come out ahead with Musk wielding his unfettered authority to reshape federal agencies and departments to make probes into his businesses disappear, while tariffs on foreign-made EVs imported could harm Telsa’s competitors and improve its retail dominance in the U.S. Musk and his businesses have already received at least $38 billion in government contracts, loans, financings and tax credits, and if conflict-of-interest rules don’t get in the way, additional deals could be granted.