Trump's Tariffs Won't Save Musk From China's BYD

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Tesla, says Garrett Nelson, analyst at CFRA Research, is the“least exposed” auto giant. Musk's company, it's worth noting, is already touting itself as making the“most American-made cars.”

TD Cowen's Itay Michaeli agrees that Tesla is a“relative winner” in the tariff wars.“Tesla a relative beneficiary given 100% US production footprint, substantial US sourcing and with Model Y competing in a midsize crossover segment where close to 50% of vehicles could be subject to tariffs,” Michaeli says.

Analysts at Deutsche Bank, note that“Tesla and Ford appear to be the most shielded [from tariff impacts] given location of vehicle assembly facilities although Ford does face incremental exposure on imported engines. GM has the most exposure to Mexico.”

Nor is Tokyo happy. Toyota Motor , the globe's biggest automaker, exports roughly half the vehicles it sells to the US market. This is despite Toyota running sprawling factories in Indiana, Kentucky, Mississippi and Texas and large engine plants in Alabama and West Virginia.

It's also despite Japan's 100% compliance with the free-trade agreement Trump 1.0 negotiated with former Japanese leader Shinzo Abe.

One question is the impact on US consumer sentiment. Even if one can argue, as Trump World does, that these tariffs will boost investment in US manufacturing that increase auto-industry efficiency, the disorientation factor could matter more.

“For consumers navigating higher prices in the short term, the promise of future gains may feel distant – at least for now,” says Jessica Caldwell, head of insights at advisory Edmunds.

Then, there are the retaliation risks. As Robert Habeck, Germany's economic affairs minister, warned Thursday (March 27):“It needs to be clear that we will not take this lying down.”

European Commission President Ursula von der Leyen called Trump's tariff escalation“bad for businesses, worse for consumers.”

The stories analysts like to tell about the global car industry are rarely straightforward. Musk, for example, didn't found Telsa – he bought the company from Martin Eberhard and Marc Tarpenning.

Nor is it clear Tesla would've survived without a ginormous $465 million federal loan from US President Barack Obama's administration.

Would BYD, meantime, be where it is today without the role German design veteran Wolfgang Egger , an Alfa Romeo veteran, played in helping to create the brand? Or the role Buffett's Berkshire Hathaway played as an early marquee-caliber cash infuser and the“halo effect” it imparted?

Then there's China's own efforts to keep global auto companies at bay.

“It is no secret that President Donald Trump loves tariffs,” Dunne of Dunne Insights explains. Trump, Dunne notes, says“I'm the Tariff Man” and“with zero trace of inhibition.”

But“what's less well known,” Dunne says,“is that China embraces tariffs in a big way, too. And China's love affair with tariffs – quiet, almost clandestine – has been going on for decades. A tall, imposing brick wall of taxes on imports , blended with targeted industrial investments, have played a pivotal role in China's rise as a manufacturing powerhouse.

How powerful? In 2024 alone, China ran a one trillion-dollar trade surplus with the world.”

When Dunne started his first company in Beijing in 1990,“China was an automotive weakling. Annual production was less than 500,000 cars; thin wood shavings compared to more than 13.5 million that Japan produced.”

To“gain industrial traction,” he adds,“regulators in Beijing slammed the door shut on imports. They set tariffs at 100%. They also strictly limited the number of import licenses granted each year. It was a double layer of protection – non-tariff barriers on top of tariffs.”

Ultimately,“China's message to global automakers was crystal clear,” Dunne notes.“If you want to sell cars in China, you will need to manufacture them inside China. And to secure an approval to manufacture inside China you must first marry up with a Chinese partner. And, by the way, the Chinese partner will own no less than 50% of the joint venture.”

In 2024, China produced 31 million vehicles, three times more than the US, where the automobile was invented. Beijing's tariff and non-tariff barrier matrix largely remains intact. In the 35 years that China spent becoming an auto manufacturing superpower, Dunne notes,“China never permitted car imports to exceed 6% of the total market.”