What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) fell 6.3% in the afternoon session after stocks pulled back (Nasdaq -1.5%, S&P 500 -1.2%) amid fresh concerns about trade tariffs. The pullback followed comments from President Trump clarifying the scope of his administration's 25% tariffs on Venezuela. He noted that it would apply to any country that does business with Venezuela. For example, 25% is on top of the already-in-place 20% tariff on China because China imports oil from Venezuela, which could translate to a 45% tariff on some Chinese goods. This announcement could significantly raise the operating costs for affected companies and institutions.
Adding to the market unease, the President announced plans for new tariffs on auto imports before the planned "reciprocal" tariffs on April 2, 2025.
The updates were registered even as Tesla barely shook off the bad news from the previous day. Notably, the European Automobile Manufacturers' Association reported a sharp 49% year-on-year decline in Tesla's EV sales in Europe for the first two months of the year, even as overall electric vehicle sales in the region continued to grow.
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What The Market Is Telling Us
Tesla’s shares are extremely volatile and have had 123 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 2 days ago when the stock gained 10.5% on the news that Reuters reported that the company planned to roll out FSD (full self-driving - highest level advanced driver assistance software) in China. This update signaled meaningful progress in gaining regulatory approval in one of the world's most competitive electric vehicle markets.
Separately, stocks rebounded (Nasdaq +2.0%, S&P 500 +1.5%) following a report from The Wall Street Journal stating that the Trump administration's reciprocal tariffs, to be announced on April 2, 2025, would be more narrowly targeted.
The market reaction indicated that investors took that as a sign the economic impact of the tariffs, particularly on inflation and growth, might not be as bad as they initially feared.
That's a bit of a relief, which likely gave businesses and analysts some space to rethink their outlooks. Earlier, the administration had hinted at much broader tariffs that could have hit any country placing duties on U.S. imports, so this shift was likely a welcome surprise for the market.
Tesla is down 28.4% since the beginning of the year, and at $271.70 per share, it is trading 43.4% 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 $7,716.
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