What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) fell 9.7% in the afternoon session after China imposed a 34% tariff on all U.S. imports amid escalating trade war tensions. This was partly in response to the "reciprocal tariffs" announced by the Trump administration the previous day, with levies on Chinese goods estimated to be as high as 50%.
Tesla was already feeling the heat in China's highly competitive electric vehicle (EV) market, where domestic rivals were gaining momentum. Now with these tariffs, Tesla's cars could get a whole lot pricier in China, reducing their appeal to cost-conscious consumers and potentially eroding market share. China made up about 20% of Tesla's sales in 2024. So, if demand drops, there could be a real dent in revenue and possibly profits.
The shares closed the day at $239.34, down 10.4% from previous close.
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What The Market Is Telling Us
Tesla’s shares are extremely volatile and have had 127 moves greater than 2.5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 2 days ago when the stock gained 5.6% on the news that Politico reported that Elon Musk may soon step down from his position at the Department of Government Efficiency, indicating a renewed focus on his business ventures, especially Tesla.
According to the report, President Trump "has told his inner circle, including members of his Cabinet, that Elon Musk will be stepping back in the coming weeks from his current role."
The White House later called the report 'garbage' and clarified that there was an agreement in place that Elon Musk would leave his role when his job was done. Musk also weighed in on the social media platform X (formerly Twitter), calling the story "fake news."
Market reaction suggested investors viewed Musk's possible exit from the government role as a positive development for Tesla. Since assuming the position, concerns had grown over how his political involvement might affect the company's performance and public perception. The story seemed to have eased some of that uncertainty.
Tesla is down 37.2% since the beginning of the year, and at $238.09 per share, it is trading 50.4% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $6,918.
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