After hitting its lowest level since the US Presidential election, Tesla (NASDAQ:TSLA) got a much-needed pop higher last week. So far in 2025, the stock is still down 34%, but over a broader one-year period, it’s up 56%. The volatility in the share price might put off some investors, but given the potential for a sharp move higher from here, it’s worth considering whether the worst of the rout is now behind us.
The case for staying away
Some might feel this is a short-term relief rally that will fade in the coming weeks. One reason for this is that the uncertainty that exists with the US tariff situation hasn’t gone away. Almost every day, there seem to be headlines about a change of direction. This is driving the higher and lower swings and movements in Tesla stock. So, although the past few days have brought relief with a 90-day tariff pause and hopes of trade deals, this could quickly revert to fears around trade wars with other nations like China.
Tesla is exposed to the overall tariff uncertainty because China is the largest EV market globally. Higher import levies will make the company less competitive. The other problem is that Tesla relies on importing some car parts from abroad, from countries that could face higher tariffs. This could increase the cost of production, even for cars sold within the US. Again, this could hurt earnings further down the line.
Finally, some investors might be worried about the distraction for CEO Elon Musk given his close ties and roles within the US government. If his focus is diverted from Tesla, it could be bad for the US stock.
The case for buying
On the other hand, this could be considered a great purchase right now. The business has already taken steps to counter potential tariff impacts. For example, it has removed some models for sale from the Chinese website. To try and stimulate demand back in the US, a new cyber truck variant has been released, which is $10k cheaper than the existing base model.
Further, Tesla is pushing rapidly ahead with other projects that reduce its reliance on selling conventional EVs. This includes the increased adoption of robotaxis, along with the development of Optimus, the humanoid robot. These, and other, initiatives should diversify investor risk by offering other sources of revenue in the coming years. It creates a larger target market size, which in turn increases the potential earnings and therefore company valuation.
Making a call
Right now, there’s too much uncertainty regarding tariffs to safely say that Tesla will not be negatively impacted going forward. It may not be the end of the stock’s slump. Therefore, it’s too risky for me to buy. However, some investors who have a high risk tolerance or who are very convinced that tariff concerns will fade away might want to consider it.
