How Tesla is skirting the China trade war

Tesla Inc. (NASDAQ: TSLA) shares made a handy gain on Friday after it was announced that the electric vehicle firm would be exempt from China’s 10% purchase tax on auto sales. In a sense, this is circumventing trade tensions with the United States. Note that this came after CEO Elon Musk visited the People’s Republic.

This exemption is usually reserved for domestic electric vehicle manufacturers, but in this case it applies to all Tesla’s sold within China.

Musk made a two-day visit to China for the World Artificial Intelligence Conference in Shanghai, where he debated Alibaba Chairman Jack Ma onstage. Musk also talked with local authorities and toured a new gigafactory. Finally, Musk met with China’s Minister of Transportation.

This tax exemption could partially offset retaliatory tariffs that may be put on Teslas and other U.S.-built cars later this year. Last week China announced that it would increase tariffs on American autos to a total of 40% in mid-December in response to the Trump administration.

Reuters said about the Tesla tax exemption: “China’s concession to one of America’s most high-profile companies comes amid heightened uncertainty as to where the trade war between the two countries is headed. A week ago, President Donald Trump ordered U.S. companies to immediately begin looking for alternatives to China, only to later suggest that tensions were cooling.”

Shares of Tesla traded up about 3% on Friday, at $228.91 in a 52-week range of $176.99 to $379.49. The consensus price target is $248.50.