Al Root

President Donald Trump's trade war is escalating fast.

Tesla stock is dropping in premarket trading Friday because President Donald Trump's tariff shock has consequences.

Shares of the electric-vehicle maker were down 5.3% at $253.22, while S&P 500 and Dow Jones Industrial Average futures were dropping 2.2% and 2.3%, respectively.

Shares had been down down slightly in premarket trading, then losses accelerated after China announced 34% retaliatory tariffs on the U.S.

The move from China comes after Trump announced 34% "reciprocal" tariffs on China on Wednesday evening. The levies were much higher than expected, with "reciprocal" tariff rates adjusted for "currency manipulation and trade barriers."

Tesla's most productive car plant is in China, and the country accounted for 22% of its total revenue in 2024. The new tariffs shouldn't drive severe cost increases for Tesla. Parts tend to be sourced locally.

Tesla didn't immediately respond to a request for comment from Barron's about cost increases due to China's tariffs.

Still, anything that impacts the perception of Tesla's brand in China is a threat to sales. What's more, Tesla can become a chip in the trade war. Canada recently excluded Tesla vehicles from its EV rebate program.

According to the Census Bureau, the U.S. imported about $440 billion worth of goods from China in 2024 and exported about $145 billion worth of goods to China.

Now, everything is getting more expensive for consumers in both countries. It will be tough for either side to declare victory in this trade war.

The drop Friday came after Tesla fell 5.3% on Thursday in the aftermath of the U.S. tariff announcements. Tech shares took it on the chin as investors weighed what tariffs on China mean for costs. The Roundhill Magnificent Seven ETF and Nasdaq Composite dropped 6.9% and 6%, respectively.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 04, 2025 07:21 ET (11:21 GMT)

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