Tesla warns the US government about automobile tarrifs

It is well known that Donald Trump is planning to impose tariffs of around 25 per cent on car imports from April. It initially remained unclear whether Trump was planning a blanket tariff on all car imports or whether he wanted to impose tariffs on certain countries or regions of the world. But now it has emerged that Tesla, of all companies, which has close ties with the US government through its CEO and major shareholder Elon Musk, is now speaking out against the planned tariffs. Tesla is less concerned about the tariffs on car imports themselves, as Tesla only sells locally produced vehicles in the USA.

Tesla is more concerned about its own exports because if the USA imposes tariffs, many of the affected countries are likely to introduce counter-tariffs. In other words, exporting cars from the USA to other countries would become more expensive.

This is why Tesla sent a letter to the office of the US Trade Representative this week – as hundreds of other companies have done in recent weeks. The letter states: “While Tesla recognizes and supports the importance of fair trade, the assessment undertaken by USTR of potential actions to rectify unfair trade should also take into account exports from the United States. U.S. exporters are inherently exposed to disproportionate impacts when other countries respond to U.S. trade actions.”

The letter continues: “For example, past trade actions by the United States have resulted in immediate reactions by the targeted countries, including increased tariffs on EVs imported into those countries. Past U.S. special tariff actions have thus (1) increased costs to Tesla for vehicles manufactured in the United States, and (2) increased costs for those same vehicles when exported from the United States, resulting in less competitive international marketplace for U.S. manufacturers. USTR should investigate ways to avoid these pitfalls in future actions.”

In the letter, Tesla points out that while growth has taken place in the USA due to past initiatives, “certain supply chains remain nascent.” Officially, Tesla states that “certain parts and components are difficult or impossible to source within the United States.” This is likely to refer primarily to batteries and their preliminary products, but also semiconductors, which are mainly produced in Asia. Tesla is, therefore, proposing a phased approach to enable companies to “prepare accordingly and ensure appropriate supply chain and compliance measures are taken.”

Tesla is not the only car manufacturer to have contacted the US Trade Representative. As Reuters writes, the Autos Drive America alliance, which represents major foreign car manufacturers such as Toyota, Volkswagen, BMW, Honda and Hyundai, has also warned of the negative consequences of US tariffs in its own letter. In this case, the companies fear that the broad-based tariffs and counter-tariffs will disrupt production at US assembly plants – and could jeopardise US jobs. “automakers cannot shift their supply chains overnight, and cost increases will inevitably lead to some combination of higher consumer prices, fewer models offered to consumers and shut-down U.S. production lines, leading to potential job losses across the supply chain,” the organisation wrote.

reuters.com, ustr.gov (letter as PDF)