New Cybertrucks sit at a Tesla dealership on April 2 in Corte Madera, California. - Justin Sullivan/Getty Images
Like many American manufacturers, Tesla is caught in a bind thanks to President Donald Trump’s trade war.
Unlike most of those other companies, though, Tesla has an added wrinkle – its CEO, Elon Musk, sometimes called the First Buddy for the close relationship he’s cultivated with the president.
On Tuesday, Tesla reports earnings; that afternoon, Musk will take questions from investors. But there is a catch-22: If Musk continues his close ties to Trump, the company could alienate potential customers, both at home and overseas, who dislike Trump’s policies. If he distances himself from Trump, though, he risks the ire of the White House. It’s a lose-lose situation, and it’s a trap of Musk’s own making.
The first quarter saw the company’s largest drop in sales after virtually nonstop double-digit sales growth. But the automaker’s finances are only part of what of what investors will want to know.
They will want to know how much the Trump administration’s 25% tariffs on all imported vehicles are costing Tesla and what Musk thinks about them.
They will want to know when Musk intends to step back from Department of Government Efficiency, or DOGE, in Washington, and focus on fixing the problems at Tesla.
They will want to see progress on self-driving cars, a Robotaxi fleet, a less expensive new Tesla model and plans to sell humanoid robots.
Reassuring responses on any these topics could help reverse the slide that has wiped out about half of Tesla’s share value (TSLA) since mid-December — and perhaps restore some faith in the company. Tesla currently faces growing competition from other EV automakers, especially in China, while Musk has drawn backlash for his high profile in the Trump administration. Bad news on any of these fronts could cause a new downward spiral for the shares.
“It’s turned into a nightmare for Tesla and for investors,” said Dan Ives, an analyst for Wedbush Securities, a longtime Tesla bull who nonetheless recently slashed his price target for Tesla shares. “The tariffs, the DOGE controversies, the brand damage — it’s been a perfect storm.”
A no-win situation on tariffs
In some ways, Tesla is less exposed than other automakers to Trump’s auto tariffs. It does not import cars from its two overseas factories, and it uses fewer foreign parts in its US-built vehicles than other automakers. All other major automakers also have at least some imported vehicles in their American dealerships.
It has stopped taking new orders in China for its higher-priced Model S and Model X cars, which are built in California, due to China’s 125% retaliatory tariffs, but those models are only a small fraction of its overall sales.
But Musk has said that the cost to Tesla will be “not trivial.”
“Important to note that Tesla is NOT unscathed here. The tariff impact on Tesla is still significant,” he said on his social media platform, X, the day after Trump’s auto tariff plans were announced.
But too much criticism of tariffs during Tuesday’s call could harm his bromance with Trump. Musk became Trump’s largest financial donor last year and has been among his closest advisors since the inauguration.
Tesla shares nearly doubled in value in the two months after the election as some investors and analysts hoped Musk would influence Trump to implement Tesla-friendly policies, most notably on self-driving vehicles.
Conversely, strong support for Trump’s tariff policies could anger Chinese authorities and EV buyers. China is the world’s largest auto market and EV market, but its consumers are increasingly turning to rivals such as China’s own BYD. Tesla booked $20.9 billion in sales in 2024 in China, about 21% of its revenue, its second-largest market after the United States.
Ives called China “the linchpin to the future success of Tesla.” He warned that “the backlash from Trump tariff policies in China and Musk’s association will be hard to understate.”
When will Musk leave DOGE?
Protests outside Tesla showrooms and vandalism at its facilities underscore the backlash the company and its CEO are facing. Some of the most popular investor questions on Tesla’s site touch on that issue.
“Did Tesla experience any meaningful changes in order inflow rate in Q1 relating to all of the rumors of ‘brand damage’?” read one question endorsed by more than 1,000 investors.
“How is the company planning to deal with the impact of Elon’s partnership with the current administration?” asked another popular investor question. Another asked: “Boycotts, protests, vandalism, negative headlines, and a stock slide have been sparked by Elon Musk’s participation in changes to U.S. gov’t services & employment. Is the Tesla board discussing whether their CEO should focus fully on Tesla and leave gov’t to elected politicians?”
US President Donald Trump listens as Tesla CEO Elon Musk speaks during a Cabinet meeting at the White House on April 10. - Nathan Howard/Reuters
When Musk held an all-hands meeting for Tesla employees last month, it sparked a one-week rally in its battered shares. But the rally proved short-lived.
On April 2, when Tesla reported its biggest-ever year-over-year drop in quarterly sales, shares fell sharply — until Politico ran a story later that morning that Musk would soon give up his role in the government. The news lifted shares. However, Musk and other members of the administration said the story wasn’t accurate.
“Tesla’s first quarter sales and production report causes us to think that — if anything — we may have underestimated the degree of consumer reaction,” JPMorgan Chase analyst Ryan Brinkman wrote in a note to clients earlier this month.
Tesla did not respond to a request for comment about its sales or the impact that Musk’s role in the administration had on those sales.
Many promises, with no progress
Musk has made ambitious promises for a fleet of self-driving robotaxis and humanoid robots, claiming that they will make the company the most valuable in the world.
He had touted plans for a driverless ride-hailing service in Austin, Texas, due to start in June. But there have been no updates. Meanwhile, Uber and Google’s own driverless car unit, Waymo, has beaten Tesla to the punch with the start of its own joint driverless taxi service in that city.
“It would be a huge negative for the stock if he pushed back (the robotaxi plans),” Ives said. “We need to hear good news there, because there’s not going to be good news in terms of earnings or what the rest of the year will look like financially.”
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