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Investors have grown accustomed to volatility surrounding Tesla (TSLA). But 2025 has brought a new and potentially more damaging headwind: a rapidly escalating U.S.-China trade war. Since early April, tensions between Washington and Beijing have intensified, resulting in a series of hikes in reciprocal tariffs by President Donald Trump on China, followed by retaliatory actions from the Asian nation — sending shockwaves through global markets.
Initially, many investors assumed Tesla would emerge relatively unscathed from this economic battle due to its extensive localized manufacturing footprint. However, recent analyst warnings suggest this assumption could be dangerously misguided. Some analysts are now sounding the alarm, cautioning that Wall Street is underestimating the serious threats that the U.S.-China trade war poses to Tesla’s business.
With Tesla shares already down sharply this year, investors face a critical question: Is Wall Street making a serious mistake by discounting Tesla’s exposure to the ongoing trade war? Let’s take a closer look!
About Tesla Stock
Tesla (TSLA) is a prominent innovator dedicated to accelerating the global transition to sustainable energy. The Elon Musk-led powerhouse designs, develops, manufactures, leases, and sells high-performance fully electric vehicles, solar energy generation systems, and energy storage products. It also offers maintenance, installation, operation, charging, insurance, financial, and various other services related to its products. In addition, the company is increasingly focusing on products and services centered around AI, robotics, and automation. Its current market cap is $776.4 billion.
The EV maker has had a tough 2025. TSLA stock is down 44.4% on a year-to-date basis, placing it among the worst performers in the S&P 500 Index ($SPX). Key factors behind this dramatic drop include declining EV sales, CEO Elon Musk’s controversial political involvement, and the escalating trade war.
Wall Street Makes ‘Grave Error’ on TSLA Stock
Although Tesla’s operational structure, with its extensive local manufacturing, largely insulates it from the latest U.S. tariffs on vehicle and auto parts imports, some analysts still believe the trade war will affect the company. Let’s explore this in more detail.
After Tesla delivered just 336,681 cars in the first quarter, the Street anticipates a significant rebound for the company in the second quarter, forecasting deliveries of 444,000 vehicles. However, Gordon Johnson, an analyst at GLJ Research, wrote in a report last Thursday, “Consensus is modeling a miraculous recovery in Tesla’s second-quarter [deliveries] despite the fact we are in the middle of the worst trade war the world has seen since the Smoot-Hawley tariff act of 1930.” The analyst added that Wall Street is making “a grave error” by assuming that Tesla will remain unaffected by the ongoing U.S.-China trade war.
Johnson believes that Chinese consumers will steer clear of American vehicles. He’s not alone in this view. Andres Sheppard from Cantor Fitzgerald noted, “There’s now the sentiment in China that they’re essentially encouraging the consumer to purchase non-American products, or in this case, Chinese products.” Notably, there’s some evidence supporting their statements, as BYD Company (BYDDY) reported Q1 sales of 416,388 battery-electric vehicles (BEVs), an impressive 38.7% increase year-over-year, solidifying its position as the world’s top electric vehicle seller for the second straight quarter. Not to mention that Tesla’s EV segment is also facing headwinds in Europe. As a result, I wouldn’t be surprised if the company’s sales in China and Europe decline more rapidly than anticipated due to tariff uncertainty and consumer backlash. And this could be a big problem, considering that international markets accounted for more than 50% of the company’s revenue in 2024.
It is also important to note that Johnson is Tesla’s most bearish analyst, giving the stock a “Sell” rating with a price target of $24.86. In contrast, Sheppard maintains a “Buy” rating on the shares with a price target of $425. The two analysts hold starkly different views on the stock, yet they agree on one risk: another challenging quarter of sales.
Meanwhile, Tesla also faces exposure to tariffs within its supply chain and on specific models. For example, tariffs could increase the cost of parts for the company, though the exact impact is difficult to quantify.
Tesla’s Q1 Results Likely to Disappoint Investors
Before looking ahead to Q2, there’s a significant catalyst on the horizon for TSLA stock - the company’s first-quarter earnings report, scheduled for April 22 after the market close. And expectations are low going into the release. It’s clear to see why. There is a major red flag dubbed “Tesla’s Q1 deliveries.”
I delved into the details of the company’s Q1 deliveries in my previous article on TSLA, so here we’ll focus solely on the key takeaways. As previously noted, Tesla delivered about 337,000 vehicles in the first quarter, down 13% year-over-year. It marked the steepest quarterly decline in the company’s history. Additionally, it fell short of Wall Street’s expectations by about 40,000 cars. With that, the dynamics of Tesla’s Q1 deliveries suggest that the company is significantly losing global market share, as worldwide EV sales continue to show strong momentum with solid double-digit growth.
Tesla’s Q1 earnings report is likely to disappoint investors, considering shrinking volumes, intensifying competition in the EV sector, and ongoing pricing pressures. The company’s lackluster delivery numbers have already signaled to investors to prepare for another difficult revenue quarter. Still, investors will be eager to see how vehicle pricing strategies, the performance of the energy and services segments, and cost management efforts have influenced the bottom line. For a more detailed Q1 earnings preview, be sure to check out my latest article on Tesla.
Wall Street analysts expect Tesla to report first-quarter adjusted EPS of $0.42. This would represent a 6.10% decline in the bottom line compared to the previous year. Also, the Street expects the company’s revenue to remain largely unchanged year-over-year at $21.54 billion. Notably, Tesla has experienced 15 downward EPS revisions and no upward revisions, along with 14 downward revenue revisions and none to the upside over the past 90 days, reflecting the prevailing negative sentiment toward the stock.
Meanwhile, Tesla is set to launch a robotaxi service in June and plans to introduce a new, lower-priced model later in 2025. Both could serve as positive catalysts for the stock, provided Tesla adheres to its timelines. When it comes to long-term projects, the company is heavily investing in robotics and developing Optimus, which Musk has called the “biggest product in history” and which he believes could generate over $10 trillion in long-term revenue. With that, investors have plenty to monitor.
TSLA Stock Remains Overvalued
Despite a substantial YTD decline, Tesla stock still looks very expensive from a valuation standpoint. The stock currently trades at a forward non-GAAP P/E multiple of 95.82x, significantly higher than the sector median of 13.85x. Tesla has long been known for its lofty valuation multiples, which were widely accepted during the years when the company consistently doubled its vehicle deliveries. However, now that the company’s growth potential is significantly challenged by intense competition, the trade war, and Musk’s reputation, it becomes difficult to justify such a high valuation.
What Do Analysts Expect for TSLA Stock?
Last Thursday, Barclays analyst Dan Levy lowered his price target on TSLA stock to $275 from $325 while maintaining his “Hold” rating. The analyst believes Tesla will face challenges in growing its deliveries in 2025. Notably, Wall Street began the year projecting approximately 2.1 million deliveries for 2025, but this estimate has now been revised down to around 1.8 million, the same as in 2024.
Overall, Wall Street analysts are divided on Tesla, giving the stock a “Hold” consensus rating. Of the 41 analysts offering recommendations for the stock, 16 rate it as a “Strong Buy,” three advise a “Moderate Buy,” 12 suggest holding, and 10 assign it a “Strong Sell” rating. The average price target for TSLA stock is $304.83, indicating upside potential of 35%.
