Ramstad: End the tariffs and open the U.S. to Chinese EVs

The article argues the U.S. should sharply lower tariffs on Chinese EVs, highlighting that U.S. tariffs rose to 25% in 2018 and 100% in 2024, while China’s low-cost EVs could start closer to $20,000 if allowed into the market. It says current U.S. auto prices average around $50,000 and the cheapest domestic EV is the $29,000 Chevy Bolt, which is ending production. The piece frames protectionism as reducing competition and slowing U.S. innovation, making it potentially sector-relevant for autos and trade policy.

Analysis

The core market failure here is not just tariff protection; it is option value destruction in the domestic auto ecosystem. By insulating incumbents from sub-$25k EV competition, policy has effectively subsidized a higher-priced equilibrium, which compresses unit growth and delays learning-curve benefits in batteries, software, and manufacturing. That matters most for TSLA: the market has been paying for an eventual mass-market scale franchise, but the policy backdrop has made that transition slower and more capital-intensive, increasing the odds that margin structure remains premium-heavy for longer while volume expansion disappoints.

Second-order, the real beneficiaries of liberalized imports would likely be consumers and upstream suppliers to Chinese OEMs rather than the U.S. OEMs themselves. Lower-cost EVs would force a price war in the $20k-$35k band, pressuring legacy ICE-heavy names, dealer margins, and high-income ASP mix, while accelerating battery commoditization and software differentiation. The fastest losers are the U.S. brands with weak EV economics and limited software monetization; the least harmed are those with manufacturing flexibility and strong financing arms, but even they face near-term gross margin compression if they defend share.

The timing matters: policy change is a multi-quarter to multi-year catalyst, but the market can rerate on even small procedural shifts because the asymmetry is about future market structure, not current imports. The tail risk is that opening the market triggers political backlash, state-level compliance hurdles, or a new national-security framing that preserves a de facto wall even if tariffs fall. Conversely, if Chinese entrants are allowed through even in limited volumes, the competitive signal alone could force U.S. OEM capex reprioritization within 2-4 quarters.

The contrarian read is that the market may be underestimating how much current TSLA valuation still embeds “winner-take-most” economics in EVs, when the more likely medium-term outcome is a fragmented market with faster price discovery and lower margins. That is bearish for U.S. automakers broadly, but especially for any name that has used tariff protection to delay low-end product development. The best trade expression is not to short the whole sector indiscriminately, but to target firms with the weakest bridge from premium EVs to mass-market share.

Key Decisions for Investors

• Maintain a tactical short TSLA into any headline that materially increases odds of Chinese EV market access; 3-6 month horizon. Risk/reward favors downside if the market starts discounting a slower path to mass-market volume expansion and sustained price pressure on future models.
• Pair trade: long Chinese EV supply chain proxies / short U.S. legacy OEM basket on any credible tariff rollback signal; 6-12 month horizon. The setup favors the names with lower-cost architectures and battery scale versus incumbents likely to defend share with margin sacrifice.
• Buy TSLA downside via put spreads 6-9 months out rather than outright short equity. This captures policy headline convexity while limiting risk if regulatory barriers remain in place longer than expected.
• Overweight auto parts and battery-material names with diversified customer bases and low dependence on U.S. OEM premium pricing; 12-month horizon. A broader EV price war should increase volumes while shifting bargaining power toward cost leaders.
• If the market overreacts to opening rhetoric, take profits on U.S. auto shorts after a 10-15% relative move; the political reversal risk is high and the catalyst path is likely uneven rather than linear.