President Donald Trump has threatened to impose reciprocal tariffs on April 2 and emphasized that these tariffs would mark a “liberation day” for the world’s largest economy. Trump’s tariffs have thus far led to turmoil as many sectors are feeling the heat of higher costs and uncertainty for what is to come in the global trade environment.
As a result, Tesla (TSLA) is one stock that investors should avoid in the short term. The company is facing multiple challenges and could be among the casualties of the escalating trade war.
Tesla Stock Has Crashed in 2025
Tesla soared to a record high shortly after the November 2024 presidential election and the stock outperformed its Big Tech peers in the final two months of 2024.
Cut to 2025, and Tesla is down 40% for the year to date, which makes it the worst-performing Magnificent 7 stock and the second biggest loser of the S&P 500 Index ($SPX).
TSLA was a leading play in the so-called “Trump trade” and rallied following the November election on hopes of fewer regulations and economic expansion in Trump’s second term. However, shares are now in the line of fire as Trump pushes ahead with tariffs and federal spending cuts as guided by the Department of Government Efficiency (DOGE), which is headed by Tesla CEO Elon Musk.
To sum up, since Musk has emerged as a key face of the Trump administration, markets have rewarded as well as punished Tesla for Trump’s economic policies, both implemented and proposed.
Even Tesla Bulls Are Getting Wary
Musk’s political activities have also taken a toll on Tesla’s business, which is reflected in its sagging deliveries. Moreover, according to Edmunds, Tesla car owners are trading in their vehicles at a record pace. The data is consistent with reports of protests and vandalism at some Tesla stores and online stories of “buyer’s remorse” among Tesla car owners.
Even some of the hardcore Tesla bulls are now getting wary. Morgan Stanley analyst Adam Jonas cut TSLA’s target price by $20 to $410 as he lowered the company’s delivery estimates for Q1 as well as the full year.
Dan Ives of Wedbush was more forthcoming and said, “Let’s call it like it is: Tesla is going through a crisis and there is one person who can fix it … Musk.” Ives added, “Investors need to see Musk take a step back and balance his DOGE and Tesla CEO roles.” The Tesla bull called upon Musk to ensure that the current turmoil “does not snowball into a much more black swan event for the Tesla brand over the coming years.”
TSLA Is Facing Multiple Challenges
That Tesla is facing multiple challenges would be an understatement. The company’s deliveries fell year-over-year last year for the first time in history, and chances of it reporting delivery growth this year are getting bleaker by the day. The company has recalled nearly all shipped Cybertrucks, which is not helping its brand.
Tesla also faces headwinds in China where domestic EV companies are racing ahead and BYD (BYDDY) has introduced new charging technology. According to reports, its new tech can charge a vehicle for 400 kilometers (249 miles) in 5 minutes.
An increasing number of Chinese EV companies are now giving away autonomous driving for free with their vehicles which puts a question mark on Tesla’s ability to keep charging hefty sums for its full self-driving (FSD). Tesla’s troubles in China could also compound as the company might face retaliation for Trump’s tariffs. Tesla has already been excluded from some EV incentives in Canada over Trump’s tariffs, and I fear other countries might follow suit.
Overall, while I am still bullish on Tesla shares for the long term, for now I would not add to my existing Tesla positions despite the stock having fallen by over 50% from its December highs.
