Tesla (NASDAQ: TSLA) shares rose at the end of last year following the election of Donald Trump as US President.

Investors at the time seemingly saw Elon Musk's relationship with the new president as a positive for the future of the EV company. 

However, since peaking in December, Tesla shares have now fallen more than 40%.

After reaching a record high of almost $480.00 USD per share in December, the EV company currently sits at $272.04 at the time of writing. 

The Tariff Timeline 

Many of us have been keeping up with the political ping-pong game between the US and its allies. But if you're playing catch-up, here's what you might have missed.

In February, US President Donald Trump announced 25% tariffs on imports from Mexico and Canada. 

However, before the tariffs went into effect, Mexico and Canada negotiated to delay them by 30 days while the countries discussed border and drug trafficking measures. 

And now, you guessed it! The 30 days are up. 

Mr Trump announced that the 25 percent tariff against Canadian imports into the US would come into effect on Tuesday (yesterday). 

Canadian authorities immediately implemented a 25 percent counter-tariff against American goods.

What's going on with Tesla shares?

This announcement saw the S&P 500 Index (SP: .INX) and the Dow Jones Industrial Average Index (DJX: .DJI) fall 1.22% and 1.55%, respectively, on Tuesday. 

Meanwhile, Tesla shares fell 4.4%. 

Tuesday's fall is the continuation of a rough few months for Tesla shares. The price is now down 28.27% year to date. 

Why the 4.4% drop on Tuesday?

On top of the Canadian Prime Minister's 25 percent counter-tariff, the premier of the Canadian province of Ontario, Doug Ford, has "mooted the possibility" of cutting off Canadian electricity supplies and exports of high-grade nickel to the US.

He also threatened to put an export levy of 25% on electricity sent to power homes in Michigan, New York, and Minnesota.

According to the BBC, Ford also announced that a C$100m contract with Elon Musk's satellite internet company, Starlink, will be cancelled.

Canada's Department of Finance estimates that cross-border trade (in both directions) amounts to nearly $1 trillion per year.

The global picture 

According to the AFR, Chinese electric vehicle maker BYD outperformed 2024 sales estimates by nearly 20 percent, as Tesla reported its first full year of decline in vehicle deliveries since 2011.

Meanwhile, in Europe, Reuters reported that new Tesla registrations in Sweden last month were down 42% year-on-year, while registrations in Norway and Denmark each fell by 48%.

Tesla registrations in France also declined by 45% over the first two months of the year compared to the same period in 2024.

But why? 

It's possible some of this decline is political.

According to Reuters:

Musk's entry into politics, his sweeping cuts to the U.S. federal workforce and endorsing of far-right political views in Europe has triggered "Tesla Takedown" demonstrations in the United States and calls for boycotts elsewhere.

What's next for Tesla shares?

It seems the Tesla share price is in a perfect storm of political tension, global economic uncertainty, and negative public perception. 

This is coinciding with developments in the EV market from competitors, giving consumers other options to consider should they choose to move away from Tesla products. 

In January, one JPMorgan analyst placed a $135 target for Tesla, inferring there could be more pain in store for shareholders.