President Donald Trump is imposing 25% tariffs on all imported cars, including those from Canada and Mexico. Such tariffs are also imposed on some parts of a car used for internal manufacturing. While this move is expected to increase the cost of new and used cars in the United States, there is one company that stands to benefit hugely from the move that is Tesla.

The electric vehicle company owned by Elon Musk is pretty shielded from the effects of these tariffs since all Tesla cars sold in North America are produced in the country. In fact, with production plants located in Fremont, California, and Austin, Texas, Tesla will not be affected by imposing the 25% additional import tax on vehicles. This is completely opposite to most of its competitors, who source most of their vehicles from abroad.

Tesla’s Strategic Advantage

During a major cut-throat year, including stagnating sales, backlash from the public about Musk’s political associations, and rising competition in the EV field, Tesla has managed to keep its boat afloat. The numbers for 2024 so far have been anything but underwhelming performance-wise, compared to 2023 figures. As for 2025, so far they have nothing to gloat about either. Interestingly, new tariffs brought in by Trump might prove helpful in financial rescue as they could exempt Tesla from the price edge costs that would most affect its competitors.

The company imports between 20% and 30% of parts that go into a passenger EV these days, which will now face the introduced tariffs. Musk admitted on X

that Tesla is “NOT unscathed” by these tariffs and claimed they will have a “significant” impact.

However, Tesla’s history of investing in local chains is an advantage, reducing the exposure to international supply chain disturbances and additional costs.

Challenging Battle for Competitors

Other car manufacturers, particularly those focused on electric automotive technologies, are in a different and more treacherous position. For example, Ford sells around 80% of its vehicles in the US, which are built domestically. At the same time, two of Ford’s most popular models, the all-electric Mustang Mach-E and the hybrid Maverick pickup truck, are built in Mexico. General Motors is in the same situation, with the Blazer and Equinox EVs being manufactured outside the United States, in Mexico. Hyundai built a significant part of its electric vehicles in South Korea, which has exposed it to tariff increases. However, the firm has received much attention in the American award market.

Even American electric car startups such as Rivian and Lucid Motors, both manufactured in Illinois and Arizona are at a disadvantage compared with Tesla. Both companies depend on mini imports and unlike Tesla, do not have deep pockets to absorb the increased operational cost. As both companies are still running with negative profits, new tariff burdens might worsen their precarious financial status.

Tesla Thrives

The tariffs that have been charged against all other EV manufacturers serve to put Tesla in the position to weaken its competition. Expected price increases on non-Tesla EVs could bring extra appeal for budget-conscious consumers toward Tesla, particularly toward some new lower-cost model the company is rumored to be preparing. If Tesla delivers economic EVs in the near future, the tariff regime can help considerably enhance its market share.

Shifting Landscape

It is interesting to note that Trump’s tariffs were imposed after weeks of speculation about his trade policy. The president has claimed these will be “permanent”, but in practice, there are chances of his going back on these words. If the political weather changes or when there is pressure on the economy, the tariffs may be altered, thereby shifting the competitive balance for Tesla.

For now, Tesla is enjoying the benefits of this situation. While the rest of the auto industry struggles with increased costs and disruption of the supply chain, Musk and Tesla could actually take advantage of a recent policy change that would strengthen their competitive position within the U.S. market. Whether this advantage is retained in the long run is still to be seen, but in the meantime, the Trump auto tariffs may be the lift Tesla needs.