
President Donald Trump’s trade war against Canada, Mexico and China could be waged at the cost of not only American consumers but also one of his closest allies: Elon Musk. Both SpaceX and Tesla (TSLA), two companies owned by Musk, rely on global supply chains and could suffer from retaliatory measures from tariff-impacted countries. Repercussions stemming from Trump’s proposed tariffs have already spooked investors in Tesla, which saw its shares fall by more than 6 percent today (Feb. 3).
Trump’s proposed measures, unveiled on Feb. 1, include a 25 percent tariff on imports from Mexico and Canada, a 10 percent tariff on energy resources from Canada and an additional 10 percent tariff on imports from China. The levies will take effect tomorrow (Feb. 4) for Canada and China, while Mexico’s tariffs have been paused for a one-month period to allow for negotiation.
In response to Trump’s tariffs, Canadian Prime Minister Justin Trudeau announced a 25 percent tariff on $30 billion worth of goods imported from the U.S. effective tomorrow. Canada plans to levy further tariffs on $85 billion worth of U.S. imports. In 2023, Canada imported around $332 billion worth of goods from the U.S. and exported $406 billion worth of goods to the country.
A 100 percent tariff on Tesla cars?
Some local officials are taking retaliatory measures a step further. Ontario premier Doug Ford today announced on X that he will “ripping up” the province’s $68 million contract with SpaceX’s Starlink, a satellite-based internet service. The deal was struck in November to provide high-speed internet access to rural, remote and northern communities.
“Starting today and until U.S. tariffs are removed, Ontario is banning American companies from provincial contracts,” Ford said in an X post, adding that the province won’t do business with people interested in “destroying our economy.”
“Oh well,” said Musk in an X post responding to the news.
Musk’s close ties with Trump has made him as a strategic target in the trade war. Chrystia Freeland, Canada’s former deputy prime minister, proposed a 100 percent tariff on Tesla vehicles alongside levies on U.S. alcohol. “We need to look through and say who is supporting Trump and how can we make them pay a price for a tariff attack on Canada,” said Freeland during a Jan. 31 interview with The Canadian Press. Freeland is running to replace Trudeau as the Liberal Party leader.
Tesla, like other car companies, relies heavily on global imports. During the company’s recent quarterly earnings call, Tesla’s chief financial officer Vaibhav Taneja conceded that tariffs could hurt the automaker. “Over the years, we’ve tried to localize our supply chain in every market, but we are still very reliant on parts from across the world for all our businesses,” Taneja told analysts. The imposition of tariffs will therefore “have an impact on our business and profitability,” he added.
When it comes to Tesla’s 2025 model year vehicles, 60 percent to 75 percent of its components are sourced from the U.S. and Canada, while 20 percent to 25 percent come from Mexico, according to a filing with the National Highway Traffic Safety Administration. Tesla is additionally reliant on Chinese companies for battery components needed for its electric vehicles.
Initial reactions to Trump’s tariffs, which the President claimed were enacted to crack down on illegal immigration and drug smuggling, also saw Mexico propose retaliatory tariffs and China threaten a legal case against the U.S. at the World Trade Organization.
In a recent post on his social platform Truth Social, Trump responded to Canada’s retaliatory proposals by claiming that it “ceases to exist” as a viable country without U.S. subsidy. “Therefore, Canada should become our Cherished 51st State. Much lower taxes, and far better military protection for the people of Canada—AND NO MORE TARIFFS!” said Trump.