President Trump's decision to impose 25% tariffs on all cars imported to the United States, including those from North American neighbors, is expected to significantly impact the electric vehicle (EV) market. The new tariff regime, which also includes a 25% tariff on certain car parts, is likely to supercharge the cost of new and used cars. However, one company stands to benefit from this move: Tesla, led by Elon Musk, President Trump's biggest financial supporter in the previous election.

The timing of the tariffs couldn't be more opportune for Tesla, which has been dealing with the fallout of Musk's promotion of far-right ideology and his involvement with the unpopular Department of Government Efficiency. The company has recently relied on promotions and price cuts to boost sales, but it still sold fewer EVs in 2024 than it did in 2023 and is off to a rough start in 2025. The new tariffs could shift that calculus, at least in the U.S.

Tesla builds all of its cars destined for the North American market in the U.S. at factories in Fremont, California, and Austin, Texas. This means none of the cars it sells in the U.S. will be subject to the 25% vehicle import tax. While Tesla does import around 20-30% of the components used to build those cars, which will be subject to tariffs, the company's longstanding effort to establish local supply chains near its factories is now being rewarded.

In contrast, other automakers are in a worse position than Tesla. Ford, for example, builds the all-electric Mustang Mach-E and the popular Maverick hybrid pickup truck in Mexico, making them subject to the 25% import tariff. General Motors, meanwhile, builds its Blazer and Equinox EVs in Mexico, and Hyundai builds its electric vehicles in South Korea. These companies will likely face increased costs, which could be passed on to consumers in the form of higher prices.

Upstart electric automakers like Rivian and Lucid Motors, which make their EVs in Illinois and Arizona, respectively, won't have to worry about the vehicle import tariffs. However, they import parts that will be subject to tariffs, and as companies still losing money on every EV they sell, they are in a worse position to absorb those costs.

This sets up a scenario where other EVs may see price increases greater than any Tesla might implement. The price separation could become even more of a boon to Tesla when it rolls out its mysterious new lower-cost EV this year, which the company has said will happen in the next few months.

It's worth noting that President Trump announced these tariffs after weeks of waffling on whether he would implement them in the first place. The president has claimed these will be "permanent," but like so many other things he proposes, that could always change. Nevertheless, for now, Tesla appears to be the biggest beneficiary of the new tariff regime, and its rivals will need to adapt to the new landscape.

The implications of these tariffs extend beyond the EV market, with broader implications for the automotive industry as a whole. As the industry continues to evolve and adapt to changing trade policies, one thing is clear: Tesla's decision to invest in local manufacturing and supply chains has given it a significant competitive advantage in the U.S. market.