What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) jumped 17% in the afternoon session after markets rallied sharply on news that President Trump announced a 90-day tariff pause. Reciprocal tariffs were also dropped to 10% for most countries, sparking renewed optimism amid ongoing trade talks. The major stock indices rose as investors, growing impatient of seemingly irrational tariff actions, welcomed the pause as a sign of a more measured path forward.
However, Trump was quick to note that China was not part of the pause. Instead, he prepared to raise tariffs on Chinese goods to 125% after China announced retaliatory tariffs on US imports. This tough stance on China stood in sharp contrast to the softer tone toward others. In a week marked by growing uncertainty, this news eased some of the pressure. The questions remain whether we are out of the woods and can sustain the rally or not.
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What The Market Is Telling Us
Tesla’s shares are extremely volatile and have had 128 moves greater than 2.5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 5 days ago when the stock dropped 9.7% on the news that China imposed a 34% tariff on all U.S. imports amid escalating trade war tensions. This was partly in response to the "reciprocal tariffs" announced by the Trump administration the previous day, with levies on Chinese goods estimated to be as high as 50%. Tesla was already feeling the heat in China's highly competitive electric vehicle (EV) market, where domestic rivals were gaining momentum. Now with these tariffs, Tesla's cars could get a whole lot pricier in China, reducing their appeal to cost-conscious consumers and potentially eroding market share. China made up about 20% of Tesla's sales in 2024. So, if demand drops, there could be a real dent in revenue and possibly profits.
Tesla is down 31.5% since the beginning of the year, and at $259.76 per share, it is trading 45.9% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $6,797.
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