This article first appeared on GuruFocus.

Tesla (NASDAQ:TSLA) is quietly reworking a big part of how it builds its U.S. cars, and the reason is pretty simple: trade tensions with China keep getting tougher. According to the Wall Street Journal, Tesla has started telling suppliers that Chinese-made parts can't go into American-built vehicles anymore. It's a major shift for a company that has long leaned heavily on China for everything from small electronics to battery materials.

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People familiar with the plan say Tesla has already swapped out some Chinese components and wants the rest gone over the next year or two. To make that happen, the company is pushing suppliers to move their production to places like Mexico or Southeast Asia anywhere that helps avoid stiff U.S. tariffs and keeps parts eligible for federal EV tax credits.

One sticking point is the lithium-iron phosphate battery, which Tesla previously sourced from China's CATL (CTATF). Tariffs and tax-credit rules have made that partnership far harder to maintain. Shares of Tesla slipped 5.9% this week during a broader pullback in tech, even as the overall market managed to finish slightly higher.