Al Root

Tesla stock was dropping sharply in early trading Thursday after an epic gain on Wednesday.

Investors were relieved that President Donald Trump paused the implementation of some of his import tariffs for 90 days. There is a problem, though. Not much has changed for the car industry.

Shares of the electric-vehicle maker, run by CEO Elon Musk, were down 4.6% in premarket trading at $260.01, while S&P 500 and Dow Jones Industrial Average futures were falling 1.8% and 1.5%, respectively.

Thursday's move comes after Tesla's 22.7% Wednesday gain. It was the second-best daily gain for the stock ever after May 9, 2013, when shares rose 24.4% after the company reported its first-ever quarterly profit. It was also a sharp reversal from the past week -- coming into Wednesday trading, Tesla stock dove more than 20% since Trump announced widespread tariffs on April 2.

Most stocks, including shares of Tesla and other auto makers, were plagued by fears that the tariffs would lead to slower economic growth, higher costs, weaker profits, and lower demand.

The problem for Tesla is that the car industry still faces 25% tariffs on imported cars. (The U.S. imports about half of the new cars sold, mainly from Mexico, South Korea, Japan, and Canada.) Tariffs as high as 25% on car parts are coming later, according to the White House.

Tesla stock rallied, but it, with other auto makers, might be shut out of coming tariff negotiations.

What's more, Trump didn't pause tariffs on China, which implemented retaliatory tariffs on the U.S. While import tariffs on American goods imported to the country don't have a significant impact on Tesla, it would prefer better U.S.-Chinese relations.

Tesla's most productive car plant is located in Shanghai. What's more, China accounted for more than 20% of Tesla's 2024 sales. It's also the home of EV maker BYD, Tesla's stiffest competition.

To be sure, Trump's actions on Wednesday show there is room to negotiate on tariffs. Auto investors, for now, are holding on to that hope.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

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April 10, 2025 04:49 ET (08:49 GMT)

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