Why Is Tesla Suing The U.S. Government?

It’s not every day that one of the most valuable companies in the world sues a world government, but this is 2020 and everything goes. After what can only be described as a disappointing Battery Day event from Tesla (NASDAQ: TSLA), the electric vehicle-maker has only gone and decided that it’s had enough of U.S. tariffs in China and wants to put an end to it. 

Details of the lawsuit

According to reports this morning, Tesla is taking out a lawsuit against the U.S. government and, more specifically, U.S. Trade Representative Robert Lighthizer over the Trump administration’s tariffs on the vehicle parts that Tesla imports from China to manufacture its electric cars.

So far, the Trump administration has launched two batches of tariffs on Tesla related to China, stretching back to 2018 when the world wasn’t on fire. Tesla isn’t asking for much in its list of demands really, it just wants the U.S.-based Court of International Trade to do the following: 

• Declare the two batches of Trump tariffs on Tesla’s Chinese goods null and void. 
• Refund Tesla the tariffs it paid with interest.

Simple really?

How much did these tariffs cost Tesla? 

The actual tariffs in question are referred to as List 3 and List 4. List 3 took effect back in 2018 and continues to place 25% duties on $200 billion worth of imported goods from China. List 4 came into effect a year later in 2019 and consists of a 7.5% tariff on $120 billion worth of Chinese imports.

It would take us hours to go through the specific items these lists refer to and Tesla has not been forthcoming about which items it actually paid tariffs on, nor how much was paid. So far, neither Tesla nor the U.S. trade representative has made statements regarding the lawsuit.

Tesla’s not alone

Even though Tesla is the biggest fish in the pond, it’s not the only one. According to reports, a whole host of lawsuits by carmakers in the U.S. have been filed, including one from Mercedes-Benz. 

Mercedes-Benz in its filing accused Washington of “prosecution of an unprecedented, unbounded, and unlimited trade war impacting over $500bn in imports from the People’s Republic of China”. Tesla in its filing called the tariffs “arbitrary, capricious, and an abuse of discretion”.

With U.S.-China relations looking to be at an all-time low right now thanks to the coronavirus and tensions related to tech companies — *cough*TikTok*cough — it is unclear how the Trump administration will respond to this latest headache, especially with a presidential election less than 50 days away.

MyWallSt operates a full disclosure policy. MyWallSt staff currently hold long positions in companies mentioned above. Read our full disclosure policy here.