How do you explain Trump's abrupt pivot on China? Elon Musk.

An aerial view of Tesla Shanghai Gigafactory on March 29, 2021 in Shanghai, China. (Photo by Xiaolu Chu/Getty Images)

President Donald Trump campaigned on the promise that he would take a hard line on China, imposing massive tariffs on all Chinese goods entering the United States. Since taking office, Trump has quickly abandoned those policies, instead promising much more modest tariffs on China — or none at all. A major beneficiary of this change is Elon Musk. The primary source of Musk's wealth, Tesla, is heavily dependent on the cooperation of the Chinese government.

During a February 2024 interview with Fox Business host Maria Bartiromo, Trump was asked about reports that he would impose 60% tariffs on Chinese goods. "I would say maybe it's going to be more than that," Trump replied. In a November 2024 stump speech, Trump said he would "tell China that if you continue to send fentanyl to Mexico or any place else that comes into our country, we're going to charge you a 25% tariff on everything you sell."

But since Inauguration Day, Trump's posture on China has changed dramatically. The earliest sign came when Trump invited Chinese Vice President Han Zheng to attend his inauguration, "the first time a senior Chinese official witnessed a US president being sworn in." Now, Trump says he is considering much lower tariffs. "We're talking about a tariff of 10% on China, based on the fact that they're sending fentanyl to Mexico and Canada," Trump said on January 21. "Probably, February 1 is the date we're looking at." (He's still threatening to impose a 25% tariff on Canada and Mexico).

Answering questions from reporters in the Oval Office on January 22, Trump said that he and Chinese President Xi Jinping “didn't talk too much about tariffs” during a call. Pressed on when he would place new tariffs on Chinese goods, Trump pivoted to criticizing Europe’s trade relationship with the U.S. “It's not just China. China is an abuser, but the European Union is very, very bad to us,” he said. “They don't take our cars at all. They don't take our farm products.”

In a January 23 interview with Fox News host Sean Hannity, Trump indicated that his preference would be not to impose any tariffs on China. “We have one very big power over China, and that’s tariffs, and they don’t want them," Trump said. "And I’d rather not have to use it. But it’s a tremendous power.” Market analysts told Bloomberg that the comments reflected Trump's "softer approach with China." Speaking at the World Economic Forum the same day, Trump said he looks "forward to doing very well with China and getting along with China."

This thinking is more in line with Musk, who is not a fan of tariffs. "In general, I am in favor of no tariffs,” Musk said last year.

China's leverage over Elon Musk

Musk, who serves as a top adviser to Trump and the head of the White House’s United States DOGE Service, has extensive business operations in China. Tesla, which accounts for the bulk of Musk’s estimated $440 billion net worth, operates its largest factory in Shanghai, which produces one million cars per year. More than half of all Teslas produced in the last four quarters were made in the Shanghai factory. Most of the Teslas made in Shanghai are sold in China, an increasingly important market as sales stall in Europe and key markets in the United States like California.

Musk has secured numerous special privileges from the Chinese government. As part of the deal to form Tesla Shanghai, the Chinese government allowed Musk to operate it as a wholly owned subsidiary of Tesla rather than a joint venture with a Chinese company — something no other car company is permitted to do. General Motors and Volkswagen were required to negotiate arrangements with local partners before building factories in the country.

Musk secured $521 million in loans from state-owned Chinese banks to fund the construction of the Tesla Shanghai factory. Tesla Shanghai also pays a discounted corporate tax rate of 15%, instead of the customary 25% rate.

The Tesla Shanghai factory, according to a commentary published by the Chinese Communist Party, is "an ideal way to convey Beijing’s position that there are no winners in trade wars and close economic ties benefit the U.S." According to the party, "[w]in-win cooperation is the right path, while closed-door exclusivity is a dead end.” The commentary implicitly underscores that Musk would be a prime target of Chinese retaliation in a trade war.

Musk is in the process of expanding his presence in China. Last year, Tesla broke ground on a $200 million battery plant in Shanghai. Musk met with Chinese Premier Li Qiang shortly before sealing the deal. Li praised Tesla as a “successful model” of foreign investment in China. Tesla is also waiting for "Beijing’s final approval of its latest driver-assistance technology, which Tesla calls Full Self-Driving."

In return, Musk has praised the Chinese government, saying they "really actually seem to care a lot about the well-being of the people.” In November, the Wall Street Journal reported that Chinese leaders were hoping Musk would help “ward off” the harsh policies proposed by Trump.

After consulting with Musk, Chinese-owned TikTok embraces pro-Trump propaganda

Last spring, Congress passed a law requiring TikTok, a Chinese company, to divest its U.S. operations by January 2025 or face a ban. The company still has not divested, and TikTok CEO Shou Zi Chew has reportedly consulted with Musk about managing the situation.

The date of the ban coincided with Trump's inauguration. TikTok repeatedly flattered Trump, informing all of its users that the company was working closely with the then-president-elect to keep TikTok operating. TikTok briefly suspended its service — to comply with U.S. law, it said — but then restored service hours later, delivering a pop-up message to its 170 million American users: "As a result of President Trump’s efforts, TikTok is back in the U.S.!"

Shortly after taking office, Trump, who initially proposed banning TikTok in 2020, signed an executive order pausing the ban for 75 days and providing immunity to technology companies that help TikTok operate in the U.S.

Since then, Trump has downplayed any national security concerns related to TikTok. "Is it that important for China to be spying on young people watching crazy videos?” Trump said last week during his interview with Hannity. “Remember, they make telephones in China. They make all sorts of things in China. Nobody ever complains about that here.”

Trump said he would support Musk purchasing TikTok to resolve the issue. But, according to a Saturday report from NPR, Oracle has the inside track on being the lead U.S. investor.

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UPDATE: Musk encourages Germans to "move on" from "past guilt"

After spending last week attempting to pass off his Nazi salute as either a joke or a hallucination, Musk urged attendees of a far-right rally in Germany to “move on” from “past guilt.” He made the comments during a remote address supporting Alternative for Germany (AfD), a political party classified as a "suspected extremist" group by the country’s domestic intelligence agency.

“It’s okay to be proud to be German,” Musk told the crowd of 4,500. “There is too much focus on past guilt, and we need to move beyond that. Children should not be guilty of the sins of their parents, let alone their great-grandparents.”

Musk did not specify the past guilt to which he was referring, but it was widely interpreted as a reference to the Holocaust. The comments were also in line with those of prominent AfD member Björn Höcke, who in 2017 denounced the Berlin Holocaust Memorial as a “monument of shame” that demonstrates a “laughable policy of coming to terms with the past".

Alice Weidel, the AfD’s candidate for chancellor in next month’s snap election, followed Musk’s speech by borrowing a line from Trump, saying, “Make Germany great again!”