The escalating tariff fluctuations caused by the U.S.-China trade dispute and geopolitical tensions have led to some American companies reducing their reliance on the Chinese supply chain. One of the latest examples is the American electric car manufacturing giant Tesla. The company is now requesting its suppliers to exclude Chinese-made components from cars produced in the United States.
According to reports from The Wall Street Journal, sources revealed that earlier this year, Tesla decided to stop using Chinese-made components in cars manufactured in the U.S. Tesla and its suppliers have replaced some Chinese-made components with non-Chinese ones. Some insiders indicated that Tesla’s goal is to transition all other components to non-Chinese sources within the next one to two years.
Since the disruption in China’s goods supply due to the Covid-19 pandemic, Tesla has been working to reduce the reliance of American cars on Chinese components and encouraging Chinese suppliers to manufacture parts elsewhere, including Mexico. However, sources told The Wall Street Journal that after President Trump imposed high tariffs on Chinese imports earlier this year, Tesla accelerated the implementation of the strategy to exclude Chinese-made components.
Some sources stated that Tesla executives have been grappling with the uncertainty brought by fluctuating tariff levels in the U.S.-China trade war, making it difficult for them to formulate consistent pricing strategies.
The geopolitical tensions between the U.S. and China and their impact on the global automotive supply chain have further underscored the urgency of Tesla’s “China-free” strategy. Sources disclosed that in recent weeks, due to disputes between the Chinese Communist Party and the Netherlands, disruptions in automotive chip supplies have prompted discussions within Tesla about expediting the diversification of component sourcing.
The U.S. is Tesla’s largest market, with Tesla vehicles on American roads coming from Tesla’s factories in the U.S. The factory in Shanghai caters to the Chinese, Asian, and European markets but does not export to the U.S.
Tesla is working on producing lithium iron phosphate (LFP) batteries for energy storage products in the U.S. The company announced last October that it expects its LFP battery production facility in Nevada to be operational in the first quarter of 2026. Tesla’s CFO Vaibhav Taneja stated in April that the company is striving to produce LFP batteries in the U.S. and “ensuring additional supply chains are not sourced from China.” Contemporary Amperex Technology Co. Limited (CATL) had been a primary supplier of LFP batteries for Tesla, but Tesla has ceased using these Chinese-supplied batteries in its U.S. manufacturing operations.
Reuters reported in April that under tariff threats, Tesla has been increasing its procurement of components from North America for its U.S. factories over the past two years. President Trump has repeatedly urged automobile manufacturers to establish factories in the U.S. to avoid tariffs imposed on automobiles and components.
The U.S.-China strained relations have kept automotive industry executives in crisis management mode throughout 2025. The uncertainty of President Trump’s tariffs, along with fears within the automotive industry of potential rare earth mineral shortages and chip scarcities from China, have forced car companies to reevaluate their reliance on the Chinese supply chain.
The Wall Street Journal mentioned that Tesla’s strategy is a prime example of how trade and geopolitical tensions are driving the decoupling of the U.S. and China and reshaping global supply chains. Tesla did not respond to requests for comments.
Currently, many American companies are seeking to exclude Chinese-made components or shift production away from China for products targeting the U.S. market. Conversely, Chinese technology companies are also removing U.S. components and technology from their supply chains.
Four sources revealed to Reuters that General Motors (GM) has instructed its thousands of suppliers to remove Chinese-made components from the supply chain. Insiders said that GM executives have been urging suppliers to find alternatives outside of China for raw materials and parts, with the goal of eventually entirely withdrawing their supply chain from China. Some sources mentioned that GM has set a deadline of 2027 for some suppliers to sever procurement ties with China.
GM’s directive targets components and materials supplied for vehicles manufactured in North America, the primary global production base of the company. Sources stated that GM prefers to source parts for use in the region from within North America but remains open to non-U.S. supply lines outside of China.