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Tesla, whose CEO, Elon Musk, has taken a leading role in the Trump administration, makes all the cars that it sells in the United States in California and Texas. That means Tesla vehicles will not be subject to tariffs, although the company will still see its production costs rise because of tariffs on imported parts.
Tesla's Model Y sport utility vehicle and Model 3 sedan were the two bestselling electric vehicles in the United States last year. But the company has been losing market share to vehicles including General Motors' Chevrolet Equinox EV and Ford's Mustang Mach-E.
Both of those electric cars are made in Mexico and will become significantly more expensive because they have more imported parts than Tesla cars. The precise impact is unclear because the administration says any U.S. content in cars assembled in Mexico or Canada will be exempt from tariffs.
Trump said Wednesday that Musk had not influenced his decision to impose tariffs. "He's never asked me for a favor in business whatsoever," Trump said at the White House.
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All automakers, including Tesla, import motors, batteries, raw materials and other parts from other countries. Those components will be subject to tariffs, raising prices across the board. Parts from Canada and Mexico will be granted a temporary reprieve from tariffs until the Trump administration can calculate and exempt from tariffs the U.S. content of each part.
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Analysts and industry executives were still calculating the financial impact. But it is likely that the tariffs will severely disrupt supply chains and lead to production cutbacks and layoffs.
Car prices could rise by thousands of dollars. Analysts at Bernstein said the tariffs would add as much as $75 billion per year to automaker costs, which they would have to pass on to car buyers.
Already, many Americans cannot afford to buy new cars. The tariffs will push lower-priced models such as the Chevrolet Trax, which is made in South Korea, even further out of reach for middle-income buyers.
"The folks at the lower end of the buying pool are going to suffer the most," said Erin Keating, executive analyst at Cox Automotive.
In the pickup market, one of the industry's most profitable segments, Ford Motor Co. could have an advantage over rivals. The company makes its F-series pickups at several U.S. factories. Toyota, GM and Ram, a division of Stellantis, build significant numbers of pickups in Mexico.
Virtually all major automakers have factories in the United States, allowing them to produce at least some cars not subject to tariffs on the finished product. BMW produces in South Carolina; Toyota in Kentucky and several other states; Nissan in Tennessee; Mercedes-Benz in Alabama; and Honda in Indiana and Ohio.
Hyundai inaugurated a new factory Wednesday in Georgia, where it will produce electric vehicles. The South Korean company also produces cars in Alabama.
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But Hyundai, Toyota and the German carmakers also import hundreds of thousands of cars from Asia and Europe, which will be subject to 25% tariffs.
Volkswagen could be among the hardest hit. It produces the Atlas SUV and ID.4 electric vehicle in Chattanooga, Tennessee, but depends on Mexican factories for models including the Jetta sedan. VW's Audi division also produces in Mexico for U.S. customers and imports cars from Europe. Porsche, which is also part of Volkswagen, imports all its cars from Europe.
The tariffs could make it even harder for Volkswagen to sell more cars in the United States, where it has long struggled to expand.
This article originally appeared in The New York Times.
