uploads/2019/05/bram-van-oost-1456130-unsplash.jpg

Will Elon Musk Regret Complaining about China to Trump?

By

Updated

Tesla stock

Today at 2:35 PM ET, Tesla (TSLA) was trading with about 5.1% losses for the day. Previously, in the week ended May 10, the company’s stock fell 6.1% compared to 2.2%, 3.0%, and 2.1% falls in the S&P 500 benchmark, NASDAQ Composite Index, and Dow Jones Industrial Average, respectively.

Article continues below advertisement

Elon Musk complained about China

The US auto industry has been one of the worst-affected sectors with the ongoing US-China trade war. Over the last couple of quarters, US auto companies’ struggles in China have intensified due to steep competition from local-market players and falling sales due to a slowing Chinese economy.

Slightly over a year ago, Tesla CEO Elon Musk took to Twitter to complain about China’s unfair trade practices to President Trump. Musk replied to one of President Donald Trump’s tweets, “Do you think the US & China should have equal & fair rules for cars? Meaning, same import duties, ownership constraints & other factors.”

What to expect next

While Musk’s intentions might have been to minimize trade barriers between the United States and China in expectation of easier trade and lower tariffs, he seemingly encouraged the president to escalate the trade war, which might not go over well with China.

In the third quarter of 2018, China started charging “an import tariff rate of 40% on Tesla vehicles versus 15% for other imported cars in China.” To avoid these tariffs, the company started building its Shanghai-based Gigafactory in China, which is under construction at the moment.

In December 2018, China reduced tariffs on US imported cars to 15%. After the recent escalation in the US-China trade tensions, investors’ fear that China might choose to increase tariffs on US imported cars again in order to retaliate to Trump’s move to increase tariffs on Chinese imported goods worth $200 billion.

In the next few days, worries about ongoing US-China trade tensions could continue to hurt investor sentiments and drive Tesla stock down.

Advertisement

More From Market Realist