Tesla Could Escape Brunt Of Trump's Tariffs While Other Brands Suffer

Newsweek

16-05-2025

Based on facts, either observed and verified firsthand by the reporter, or reported and verified from knowledgeable sources.
Newsweek AI is in beta. Translations may contain inaccuracies—please refer to the original content.
Elon Musk's Tesla will remain largely unscathed from the expected negative impact of Donald Trump's tariffs on the U.S. and global car industry, experts have told Newsweek.
Digital insurance agent Insurify expects the billionaire's company to see a modest 5 percent increase on sales prices as a result of the Trump administration's policies, while car sales prices in the U.S., in general, face an average 15 percent increase.
Why It Matters
Tariffs imposed by the Trump administration have received significant backlash from the U.S. auto industry, to the point that the president announced a softening of the policies in late April.
While Trump has presented his tariffs as a way of helping American manufacturing thrive against global competitors, companies and dealerships have expressed concern over rising costs, which are expected to bring up prices for U.S. consumers in the short term.
What To Know
In April, the Trump administration introduced a 25 percent tax on cars imported into the U.S. Earlier this month, a 25 percent import tax on engines, transmissions, and other crucial car parts came into effect.
These levies are expected to have enormous consequences on the U.S. car market, considering that nearly half all vehicles sold in the country last year were imported from outside the nation. Additionally, many U.S. manufacturers rely on parts imported from abroad.
According to Insurify's early projections, new car sales prices in the U.S. will increase by about 15 percent as a result of Trump's tariffs on the U.S. trading partners, and insurance costs will rise by 6 percent. Some foreign-assembled models might see price hikes of up to 25 percent.
"About 75 percent of the materials used in vehicles purchased by Americans come from outside the U.S., according to the White House," Insurify's Matt Brannon told Newsweek. "Tariffs have raised the cost of those automobile imports and auto parts imports, which will in turn make car prices more expensive because they are pricier to produce."
People walk by a Tesla showroom on May 1, 2025, in San Diego, California.
People walk by a Tesla showroom on May 1, 2025, in San Diego, California.When it comes to insurance, carriers will be facing higher costs for repairs or replacements, and they are likely to take that into account when they set rates, transferring the financial burden to customers.
"Tariffs could increase car insurance rates for all models, but newer models are facing larger increases because more expensive cars are generally more costly to insure, and they may require more specific parts," Brannon said.
"Because of the auto parts cost increase, insurers will have to spend more money on repair claims, and the consensus is that to avoid excessive losses, insurers will pass those costs to policyholders through higher premiums."
Newsweek contacted Tesla for comment by email on Friday morning.
Modest Price Hikes for Tesla, While Buick and Hyundai Will See Massive Increases
Tesla will be among the least affected companies, Insurify experts found, with the company's sales prices expected to rise by only 5 percent and insurance costs by 3 percent—the lowest increases of the brands analyzed by the team.
"Tesla's most popular new models, the Model X and Model 3, are assembled in the U.S. with at least 60 percent domestic content," Brannon explained.
"So, compared to other popular models, these Teslas have a smaller share of foreign material that would be tariffed. Additionally, the Tesla content that is foreign is mainly sourced from Mexico, which faces lower tariff rates for autos compared to vehicle content from nations that aren't part of the U.S.-Mexico-Canada Agreement (USMCA)," he added.
The Tesla Model 3 contains 73 percent of U.S. content, and the Model X is made up of 60 percent of U.S. content, according to National Highway Traffic Safety Administration data.
"While these vehicles would still see both cost and insurance rate increases, we expect those increases will be much smaller compared to models that have a higher percentage of foreign content," Brannon said.
Musk previously said that tariffs won't impact Tesla as much as other U.S. automakers, as the company has "localized supply chains" in North America, Europe, and China. The billionaire, who has recently taken a step back from his prominent role in the Trump administration, said that he opposes high or unpredictable tariffs, but stated that it is "entirely up to the president of the United States" to decide on them.
Buick and Hyundai, on the other hand, will face the highest price increases at 22 percent, according to Insurify's projections, followed by Kia at 21 percent. Another company that, like Tesla, will see only modest increases is Jeep, at a projected 6 percent.
Of the 100 bestselling new models analyzed by Insurify, 22 could face both a 25 percent increase in sales prices and a 9 percent increase in annual insurance costs—what Brannon said are the maximum potential increases according to their projections.
That includes seven of the top 50 bestselling new models of 2025: the Toyota RAV4, Chevrolet Trax, Subaru Forester, Mazda CX-5, Hyundai Elantra, Chevrolet Trailblazer, and Hyundai Palisade, Brannon explained.
Of the three most popular new car models in the U.S., the Toyota RAV4 would see the highest projected cost increase due to tariffs, at 25 percent, followed by the Chevrolet Silverado (12 percent) and Ford F-series (11 percent).
Risk Of Higher Insurance For Teslas
Widespread anger against Musk and his role in massive cuts to the federal workforce implemented by his Department of Government Efficiency has brewed across the country in recent months and exploded in acts of vandalism against Tesla cars and dealerships.
These incidents, should they continue, could fuel insurance rate hikes for Tesla vehicles, experts say.
"If rates of Tesla vandalism continue to rise and don't decrease, it is possible that we could see premiums for these vehicles rise in the future," Brannon said.
"However, it could take months before we have hard evidence of targeted Tesla vandalism raising rates for Tesla models in general—vehicles that haven't actually been vandalized," he added.
"If a Tesla owner has already had their vehicle vandalized, they are likely to pay more in premiums if they file a vandalism claim because insurers typically raise rates on individuals who file a claim, since the claim is evidence that the policyholder presents additional financial risk to the insurer," Brannon said.
What Happens Next
Tesla's resilience to the Trump administration's tariffs might help the company at a time of difficulties, though Musk himself said that the company won't be completely unscathed by tariffs and will still suffer their impact.
Last month, Tesla quarterly earnings and sales reported a 20 percent year-over-year fall in revenue and a 71 percent drop in net income.