Would Trump’s extreme tariff plan help or hurt Elon Musk?

The car companies that Elon Musk most respects are from China, as the Tesla CEO explained in January when discussing his company’s financial results with Wall Street analysts.

“The Chinese car companies are the most competitive car companies in the world,” Musk remarked. “I think they will have significant success outside of China depending on what kind of tariffs or trade barriers are established.”

It must be music to Musk’s ears, then, that his preferred U.S. presidential candidate, Donald Trump, has promised if elected to drastically raise tariffs on Chinese imports, which would include automobiles, to 60%.

The 60% rate is far above the Biden administration’s tariffs on China, and nearly triple the 25% that Trump imposed on Chinese goods during his time in office. Such a punitive measure would presumably short-circuit aggressive Chinese auto imports, a boon to Musk’s competitive outlook.

And yet, the reality of tariffs can swing both ways.

In July, Tesla’s chief financial officer, Vaibhav Taneja, noted the profit margin for Tesla’s “Cybertruck” and Model 3 cars are “affected by varying amounts of tariffs on both raw materials and finished goods.”

On the same conference call, Musk remarked that he had paused his company’s investment in production at Tesla facilities in Mexico because “Trump has said that he would put heavy tariffs on vehicles produced in Mexico.”

Across the landscape of tariffs and trade, the complexity of the global supply chain makes it hard to declare winners and losers if a Trump-Vance or a Harris-Walz ticket comes into the White House in 2025.

Should the U.S. elect Kamala Harris president, it would most likely be status quo for tariffs, although that’s not certain, given that there is an upward pressure on punitive tariffs on Chinese goods in both the Democratic party and the Republican. Harris has aped Trump to an extent by promising a 100% tariff on imports of Chinese automobiles.

Should Trump win the electoral college, it would most certainly mean a much more severe tariff regime. Even those stark differences are hard to parse in terms of the effects on individual companies. Unlike Harris, who has talked of targeted tariffs on certain goods, and has said nothing about imports from countries outside of China, Trump has promised a 20% across-board tariff affecting imports from all countries.

“It just becomes very messy,” says Richard de Chazal, macroeconomic analyst with William Blair, regarding how to anticipate tariffs’ effects.

“Trump’s tariffs more generally are also likely to have a damaging impact on the U.S.,” says de Chazal. For one thing, “American companies who are manufacturers do actually need to import some of these input goods that are being tariffed, and those higher costs will come at a price,” as in the case of Tesla’s CFO’s remarks about materials.

At the same time, “You’re obviously going to get a slew of retaliation from all the different countries that are affected by that” across-the-board tariff, he says.

Tariff talk in the abstract is “like a football team that practices and thinks that’s like the game,” says Blair Levin, policy analyst with Wall Street research house New Street Research. “It’s not like that in the real world: the other side responds.”

“If you put tariffs on foreign goods, you might think it won’t affect you, but China and France and Brazil and everyone will respond.” One thinks of duties imposed overseas on U.S. bourbon and Harley-Davidson motorcycles the last time Trump imposed broad tariffs.

While the risks in aggregate to U.S. tech firms may be complex, uncertain, and “messy,” individual tech companies have already been citing specific risks for many months now.

Redmond, Oregon-based Expion360, which makes lithium-ion batteries for light-duty vehicles, has all its production done in China. In June, CEO Brian Schaffner told analysts that while his company is already facing an 11% tariff on its products coming into the U.S., he is contemplating how to deal with potentially higher tariffs.

“We have a little bit higher inventory than you normally would see” on the balance sheet, he said, to guarantee product to customers “in order to give us enough of a runway to pivot our manufacturing to Scandinavia if we had to.”

Other companies say tariffs have already altered the marketplace. Self-driving car chip maker Mobileye last month cut its outlook for this year’s sales by 13%, citing tariffs on Chinese vehicles that it supplies.

Tesla competitor Rivian of Irvine, California, has told analysts it could enjoy a substantial cost savings if it could obtain Chinese batteries without tariffs.

“The cost of a Chinese battery is, today, not slightly lower, it’s massively lower than a non-Chinese battery,” Rivian CEO Robert Joseph Scaringe remarked to analysts in May. “And by and large, today, we haven’t really seen those [Chinese batteries] in the US because of tariffs.”

The broader tone from tech CEOs is one of uncertainty and caution.

“With every new number that gets thrown around tariffs, it creates a tremendous chaos in our supply chain,” said Revathi Advaithi, CEO of Flex, a contract manufacturer, on a conference call with analysts in July. Flex makes things for customers in thirty countries, and gets 19% of its annual revenue from China.

On the plus side, strategizing about where to build becomes part of Flex’s value-add. “Just a couple days ago, I was with another customer really talking about accelerating product movement for them as a result of the new tariffs that we have heard about,” said Advaithi. “That’s not great for the whole market, but it provides us with an opportunity because we plan ahead.”

For anyone who thinks they know the outcomes of either a Trump or a Harris regime, think again. Not only are the tariffs subject to change, and the response from other countries potentially vast, the implementation of tariffs has elements of great uncertainty.

“You have to ask also, how much power does Trump actually have to put on those tariffs?” de Chazal of William Blair cautions. “We think the president has a free hand to put tariffs anywhere, but they do need some power from Congress to enact those.” As a consequence, “There’s a lot of pomp about how much of this could actually get done.”

Then, too, some tariffs are “transactional,” meant to elicit bargaining before tariffs take their final form, a pattern that was seen in Trump’s use of tariffs to elicit concessions, including from American firms. As Bloomberg’s Nancy Cook and colleagues reported in July, Apple CEO Tim Cook was able to get Trump to back off of 25% to 50% tariffs on iPhones imported from China to the U.S. by promising to make Mac computers in Texas.

“A transactional person always looks to, How do I increase personal leverage,” observes New Street’s Levin. “He [Trump] has correctly realized that if he imposes a 10% tariff on everything, but holds out the prospect he could raise or lower, then approximately one third of the economy will come to him and say, Mr. President, we’ll do whatever you want if you lower the tariffs we pay, and increase it for our competitors.”

The answer to really blunt tariff talk, from either the Trump or the Harris camp, would be a more nuanced U.S. industrial policy that would benefit companies, workers, consumers, and the economy as a whole.

“The thinking around trade has shifted from unfettered globalization with the realization that that hasn’t really worked, and has created some damage for many parts of the economy,” says de Chazal.

“There has to be a middle ground: some protectionism is probably necessary, but random taxing [in the form of tariffs], imposing 20% or 60%, without a specific goal, is not particularly helpful.”

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