Source: Tesla

Amid the escalating tariffs dispute between the world’s two largest economies, Tesla is facing serious challenges as it prepares for the Cybercab and Semi models’ mass production.

Tesla originally planned to import parts for the two vehicles from China. However, after the U.S. government significantly raised tariffs on Chinese goods, the plan has been reportedly put on hold.

Source: Tesla

A Rapid Escalation in Trade Tensions

The current crisis stems from a series of retaliatory tariff increases between the U.S. and China that began earlier this year. On January 1, 2025, China adjusted its Most Favored Nation (MFN) tariff rates, while the U.S. modified Section 301 tariffs on select Chinese goods, including tungsten, wafers, and polysilicon.

The situation escalated on February 4 when the U.S. imposed a 10% tariff on all Chinese imports under the International Emergency Economic Powers Act (IEEPA), prompting China to retaliate on February 10 with its own tariffs.

By March 4, the U.S. expanded tariffs to 10% on all Chinese imports under IEEPA while also targeting non-compliant imports from Canada and Mexico under the USMCA, leading to another round of Chinese countermeasures on March 10.

The U.S. further tightened restrictions on March 12 by reinforcing Section 232 tariffs on steel, aluminum, and derivative products, followed by a 25% tariff on automobiles introduced under Section 232 on April 3.

The trade war intensified in early April when the U.S. expanded tariffs to 10% on nearly all countries, including China, with limited exemptions on April 5.

Just four days later, on April 9, the U.S. imposed steep new tariffs ranging from 1% to 74% on trade-surplus nations, hitting China with a 74% rate plus an additional 50% as counter-retaliation. China responded aggressively on April 10 with an 84% tariff hike, leading the U.S. to roll back some measures—except for China, which then faced a staggering total 125% tariff.

After further negotiations and adjustments, including exemptions for semiconductor-related products on April 11–12, China retaliated once more, matching the U.S. 125% tariff level.

The tit-for-tat continued today (April 16) as the US raises total tariffs to 245% on imports from China, by and large killing global trade between the two nations (if that had not been done already).

Source: Tesla

Tesla caught in the crosshairs

Elon Musk has repeatedly emphasized to investors that the Cybercab and Semi would be key drivers of Tesla’s next growth phase, especially its robotaxi aspirations.

Tesla reportedly intended to absorb the additional from the tariff costs internally. But as tariffs surged further, the company could no longer bear the burden and ultimately had to suspend shipments.

According to Tesla’s original plan, the company was set to receive parts over the coming months and begin trial production of these two models in October.

The Cybercab was to be produced at Tesla’s Texas factory, while the Semi would be handled by the Nevada factory, with the goal of achieving mass production by 2026 and accelerating deliveries of backlogged orders to customers like Pepsi.

Notably, before the U.S. tariff hike at the end of last month, Tesla announced that its Cybercab self-driving taxi would launch in Austin, Texas, in June 2025—earlier than the originally planned 2026 release date.

However, with this sudden change, the launch timeline may now need to be adjusted as well.