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U.S. automaker Tesla has cautioned that it, as well as other leading American exporters, might be hit with retaliatory tariffs as a consequence of President Donald Trump’s belligerent trade policy.
The EV behemoth raised the alarm over the economic consequences of Trump’s tariff approach in a letter to the U.S. Trade Representative’s Office, which was released on the office’s website on Tuesday.
Tesla’s warning is repeated by many of America’s companies, but as the company has a leading position in the car industry, this warning is exceptionally important. Tesla’s CEO Elon Musk, one of Trump’s known supporters, has been among the most vigorous proponents of attempts to make the federal government run more efficiently, leading the self-styled Department of Government Efficiency.
Consequences for American Automakers
Tesla’s letter highlights the potential consequences of tariff-fueled trade wars. The automaker pointed out that past U.S. trade actions have brought about instantaneous retaliatory actions from targeted countries, resulting in higher tariffs on EVs being imported into such countries.
“U.S. exporters are naturally subject to disproportionate effects when other nations react to U.S. trade measures,” Tesla said in the letter. The automaker called on policymakers to make sure that attempts to solve trade problems “do not inadvertently hurt U.S. businesses.”
As Trump is weighing heavy tariffs on cars and auto components as early as April, Tesla is advocating a strategic response to avoid supply chain interruptions. The company explained that although it is in favor of localization, “certain parts and components are difficult or impossible to source within the United States.”
Industry groups echo Tesla’s warnings
Autos Drive America, a trade association representing big foreign automakers like Toyota, Volkswagen, BMW, Honda, and Hyundai, also sounded the alarm on the proposed tariffs. The group cautioned that broad-based tariffs would impact production at American assembly plants, leading to supply chain disruptions, increased consumer prices, lower vehicle model offerings, and possible job loss.
“Automakers cannot change their supply chains overnight, and cost hikes will necessarily translate into some combination of higher consumer prices, fewer models available to consumers, and idled U.S. production lines,” the group said.
As the White House weighs whether to impose these tariffs, Tesla and other industry leaders are calling for a more gradual and step-by-step approach to prevent unintended economic fallout.
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