The U.S. Trade Representative rejected Tesla's request late last month, multiple media outlets reported Friday, for relief from the 25% tariff on China-made goods put in place by President Donald Trump last year.
Tesla had said the levy would hit its profits and cause economic harm. The USTR, however, said the components are part of Beijing's 'Made in China 2025' economic strategy and therefore are considered strategically important to its industrial program.
Tesla shares were marked 0.6% lower at the start of trading Friday to change hands at $212.60 each, snuffing out a June run that has seen the stock rise nearly 20%.
Analysts have been concerned with Tesla's tariff-related risk for several months, given the company's reliance on both China-based manufacturing and overseas sales.
Last month, Morgan Stanley analyst Adam Jonas sent shares in the group sharply lower after he reduced his "bear case" outcome for the stock price, a view based on a series of worst-case scenarios for Tesla, to $10 a share from a previous estimate of $97 amid increasing concern it could find itself trapped in a tech and trade war between Washington and Beijing.
Jonas's estimate is for Tesla sales in China, between 2020 and 2024, to generate around $9 billion in revenues. However, should officials in Beijing respond to the increasingly damaging trade war and target Tesla with reprisal tariffs or restrictions, that figure could be sliced in half and carve more than $16.4 billion in market value from the Palo Alto, California-based company.