In a recent move to reduce the US trade deficit with China, President Donald Trump announced that the United States would impose tariffs on Chinese-imported goods worth $50 billion.
According to a Reuters report, Trump has also stated that he will “pursue additional tariffs if China engages in retaliatory measures.” Let’s take a look at how this new development could hurt Tesla’s (TSLA) China Gigafactory plans going forward.
Implications on automobiles
The list of goods on which the United States has imposed tariffs doesn’t currently include automobiles. Nonetheless, the auto industry may not remain unaffected for long if China retaliates with similar measures on US imports, which could lead to a US-China trade war, hurting the relations between the world’s two largest economies.
The recent tariff announcement has fueled auto investors’ concerns as they remain worried about the consequences of an intensifying trade war and its implications on the auto industry.
Tesla’s ambitions in China
In contrast, Tesla was still trading in the green with a minor gain of 0.7%. TSLA stock has risen significantly so far in June after its annual shareholder meeting on June 5. Read Market Realist’s special report, Tesla’s Annual Report: Model 3, Supercharger, and Gigafactory, to learn more.
During Tesla’s recent shareholder meeting, its management confirmed that its first Gigafactory outside the United States would be located in Shanghai, China. Tesla’s CEO, Elon Musk, said during the event that the company could announce the “details of the China Gigafactory as soon as next month.”
However, worsening trade relations between the United States and China could become an obstacle for Tesla’s ongoing discussions with Chinese authorities regarding its upcoming China Gigafactory. The Chinese auto market, being the largest electric vehicle market in the world, is very important for Tesla’s future growth.