TLDR:
- Tesla stock rose 7.7% in premarket trading following a US-China trade deal
- US reduced base tariff rates on Chinese goods to 10% for 90 days
- Tesla’s China sales have been declining, with Q2 showing a 15% year-over-year drop
- Cathie Wood of Ark Invest forecasts TSLA could reach $2,600 (800% increase)
- Tesla is preparing to launch its self-driving taxi service in Austin, Texas this June
Tesla’s stock soared on Monday following a breakthrough in US-China trade relations over the weekend. Shares jumped 7.7% in premarket trading to $321.18, pushing the electric vehicle maker’s market value back above the $1 trillion mark for the first time since February.
The rally came after President Donald Trump announced progress in trade talks with China. “A very good meeting [Saturday] with China, in Switzerland. Many things discussed, much agreed to,” Trump posted on Truth Social.
Under the new agreement, the US will reduce its base tariff rate on Chinese goods to 10% for the next 90 days, down from 34%. Additional tariffs from subsequent actions have also been suspended while negotiations continue.
🚨 Breaking:
🇺🇸 U.S. to cut tariffs on Chinese goods from 145% to 30% for 90 days.
🇨🇳 China to cut tariffs on U.S. goods from 125% to 10% over the same period. #Trade #USChina #Tariffs pic.twitter.com/hEwp9OJoWV
— Trader Edge (@Pro_Trader_Edge) May 12, 2025
China is lowering its tariffs as well. This represents a major de-escalation from previous levels, which had exceeded 100% – essentially functioning as a trade embargo.
Wedbush analyst Dan Ives called this a “positive step in the right direction” in a Sunday report. The news is particularly important for Tesla given China’s significance to its business.
China accounts for 22% of Tesla’s total revenue as of 2024. The company’s most productive car manufacturing facility is located in China.
China Sales Under Pressure
Tesla has faced challenges in the Chinese market recently. Sales in China fell about 2% year-over-year in the first quarter, according to industry data tracked by Wall Street.
The situation worsened in the second quarter, with sales down approximately 15% year-over-year in the first five weeks, based on data from Citi analyst Jeff Chung.
Cantor Fitzgerald analyst Andres Sheppard noted that Chinese consumers have been choosing BYD vehicles over Tesla cars. “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,” Sheppard told Barron’s.
The trade tensions had hurt Tesla’s stock previously. Shares dropped more than 10% over several days in mid-April as tariff rates between the US and China escalated. The stock closed below $230 on April 21.
Bright Future Ahead?
Beyond the trade deal, investors are showing optimism about Tesla’s upcoming self-driving taxi service. The company plans to launch the service in June in Austin, Texas.
CEO Elon Musk confirmed this timeline during Tesla’s first-quarter earnings call on April 22. This robotaxi service is expected to become a major focus for investors as June approaches.
Tesla’s recent stock performance has been impressive. The company has seen its shares climb approximately 15% over the past month, outperforming both the broader market and other automotive stocks.
The electric vehicle manufacturer has made substantial progress in production. In its latest quarterly report, Tesla announced it had delivered over 520,000 vehicles globally, representing a 12% increase year-over-year and beating analyst estimates by approximately 8%.
This is particularly notable given the ongoing supply chain challenges affecting the automotive industry. Tesla has shown an ability to navigate these obstacles more effectively than competitors.
Tesla’s Full Self-Driving (FSD) technology has also made strides recently. The company reported that its FSD subscription service has reached over 200,000 active users, creating a substantial new revenue stream.
Cathie Wood of Ark Invest has made headlines with an extremely bullish outlook on Tesla. She projects that Tesla’s stock could reach $2,600 within five years – nearly 800% above its current price of around $300.
Ark Invest CEO Cathie Wood just went on CNBC and reiterated her $2,600 Tesla $TSLA price target by 2030.
I like Cathie, but didn't she predict $TSLA $3,000 by 2025 a few years ago?
pic.twitter.com/7IjnCkyYl8— Jesse Cohen (@JesseCohenInv) May 9, 2025
Many analysts remain skeptical of such lofty projections, pointing to Tesla’s current P/E ratio of 151, which far exceeds both the broader market and other tech giants.
The stock is currently approaching key technical resistance levels. The nearest is at $320, which aligns with lows from late November 2024 and early February.
Tesla’s technical indicators suggest a breakout from a two-month consolidation phase. The stock recently surged past the $290 level and broke above its 50-day and 200-day exponential moving averages.
As Tesla enters this week trading just under $300, investors will be watching how the stock responds to the dual catalysts of reduced trade tensions and the upcoming robotaxi launch.
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