Even the perennially bullish crowd of analysts covering Tesla warned of sorely disappointing results in Q1, a view signaled by the poor deliveries for the quarter reported in early April.

But the numbers released after the market close on April 22 were much, much worse than expected. Automotive sales tumbled 20% over the same period last year to $14 billion. Despite a strong 12-month gain in its industrial and residential battery storage franchise, overall revenues plunged 9%. Falling sales hammered profitability, sending net income down nearly 40% to a piddling $409 million, far below the over $600 million forecast by Wall Street.

Following the bad, but not-nearly-as-bad Q4 report, this writer introduced a new concept for measuring Tesla’s repeatable, bedrock earnings generated by its current businesses––almost exclusively comprising cars and batteries, plus a small services unit. To get there, I eliminated such one-time gains as a big tax benefit in the final quarter of 2023, and a non-cash profit on the $600 million write-up of its Bitcoin holdings in Q4. I also eliminated earnings from the sale of regulatory credits to competing carmakers, a benefit that Musk himself says will prove ephemeral. 

What we’ll call these hardcore profits show how much of Tesla’s gigantic–currently $812 billion–market cap is justified by what it’s doing now, though its present business is declining, and how much owes to Musk promises for full self-driving vehicles and software and robotaxis. So far, those assurances have proven a constantly receding horizon.

In the past quarter, Tesla lost money on “hardcore” businesses

To get to that number, I started with net earnings of $409 million, and subtracted its after-tax profit from the sale of reg credits. That figure is $433 million, and accounts for over 100% of Tesla’s total profits. For the past four quarters, Tesla’s posted a “hardcore,” hopefully “repeatable” number of $3.5 billion. Hence, it’s now selling at an adjusted P/E of over 230 (the $812 billion valuation divided by my profit number of $3.5 billion.) By the way, at its peak in 2022, Tesla’s “hardcore number” for the year was almost $12 billion, over three times what it achieved in the past 12 months. 

Let’s give the car-battery business a P/E of 20, twice the global industry average, just to be generous. That puts the worth of its currently-up-and-running operations at $70 billion. The entire difference of $742 billion is essentially a blind vote of confidence that Musk will deliver years of earnings growth from here seldom witnessed in the annals of capitalism and never achieved by a player of Tesla’s age and size.

If you want a 10% return from here, Tesla stock price would need to double from today’s $235 to $470 in seven years. Of course, Musk’s machine got there just a couple of months ago. But the future looks a lot dimmer now than it did in the heady days following Trump’s election. Hitting the worth means Tesla’s market cap must also double, to over $1.6 trillion. At a, once again, generous forecast of a 30 P/E, the net earnings required are well over $50 billion. Cars won’t do it. Tesla would need to earn half of what Apple generates now on franchises that today remain the realm of gauzy assurances.

It looks like Musk once again is fogging investors’ minds

The Tesla Q1 press release blamed the miserable performance on “uncertainty in the automotive and energy markets [that] continues to increase as rapidly evolving trade policy adversely impacts global supply chain and cost structure of Tesla and our peers.” In other words, Tesla’s blaming Musk’s boss in the White House. But in the minds of Tesla fans, Musk once again saved the day. The Q1 statement announced the EV giant would indeed launch the long-awaited, affordable, apparently all-new Model Y by mid-2025, and introduce a fleet of robotaxis in its hometown of Austin, Texas in 2026.

The market’s cheering, at least for now. In after-hours trading on April 22, Tesla gained 3.5% following a 4.6% jump during the day. In the movie musical “The Music Man,” slick salesman Henry Hill charmed the good townspeople in the mythical city of River City into paying up for carloads of trombones and clarinets that were always just about to arrive. Hill’s wordplay instilled visions of a great marching band that intoxicated his audience.

The Music Man’s got nothing on Elon Musk. 

This story was originally featured on Fortune.com

• Despite early White House signals suggesting a trade deal with Japan was imminent, negotiations in Washington, D.C., ended without an agreement, highlighting Japan’s ongoing concerns and reluctance to concede ahead of domestic elections. Conflicting messages from U.S. officials and resistance from global partners like China suggest bilateral trade talks will be protracted, casting doubt on President Trump’s ambitious “90 deals in 90 days” goal.

During the weeks leading up to a visit from Japan’s chief trade negotiator, the White House dropped hints it was closing in on a deal.

Indeed, speculation was rife that the visitor from Tokyo might even secure the “first mover” advantage touted by Treasury Secretary Scott Bessent: winning advantageous terms as the country quickest to agree to a deal with the Trump administration.

And yet Ryosei Akazawa, Japan‘s economic revitalization minister, has gone home without an agreement in place—telling local media he had urged the Americans to reconsider their “extremely regrettable” action.

Moreover, Japan’s prime minister said only yesterday he still has “grave concerns” about some of the policies announced by the Oval Office.

Additionally, when Bessent meets with Japanese Finance Minister Katsunobu Kato in Washington, D.C., this week, the topic of boosting the yen is set to come up for discussion. The request is likely to be denied, sources told Reuters.

At odds with White House message

Such resistance from Tokyo is at odds with the message coming out of the White House, with President Trump saying “big progress” has been made in talks with Japan.

Likewise Commerce Secretary Howard Lutnick said Trump was “totally in the driver’s seat” when it came to tariff negotiations, and that meetings with more than 75 countries trying to cut a deal were “back to back.”

The conflicting messages are leading analysts to wonder how realistic Trump’s “90 deals in 90 days” pledge will prove to be.

Investors are losing confidence in the U.S. dollar this week precisely because of this fear, wrote Thierry Wizman and Gareth Berry, rates strategists at Macquarie, in a note seen by Fortune.

“Many observers, including ourselves, had pointed to Japan as an early test case for an early deal,” the duo said. “And yet, the bilateral negotiations between the U.S. and Japan ended without the contours of a deal in place late last week. 

“It is not clear which issues remain as stumbling blocks—it could be the U.S.’s demands for access to Japan’s agricultural markets, [Japanese yen] revaluation, higher military spending in Japan, or purchases of U.S. LNG [liquefied natural gas], etc.”

A long and drawn out process

And while America, the world’s largest economy, might be squeezing its allies toward a deal, there are other pressures shaping the global response to Trump’s administration.

Notably, China warned yesterday that any countries working against its interests would be punished.

The U.S. is doing precisely that, having ramped up a series of tariffs on China to the point of a 145% hike on imports from the nation. To sign a deal with the U.S., therefore, could put any nation at the mercy of retaliation from Beijing.

“China firmly opposes any party reaching a deal at the expense of China’s interests,” a Chinese Commerce Ministry spokesperson said yesterday. “If this happens, China will never accept it and will resolutely take countermeasures.”

Likewise the Macquarie analysts cite internal pressures on political leaders as a reason not to sign on the dotted line.

“What’s made matters worse is that Japan’s prime minister … is facing upper house elections on July 20 (notably, after the end of the 90-day tariff reprieve). That may be forcing him to avoid seeming conciliatory to the U.S., until the elections are over,” the analysts added.

“In any case, the events surrounding the U.S.-Japan negotiations late last week suggest that there will be at the very least a lengthy period of bilateral negotiations between the U.S. and all of its bilateral partners that may stretch into July, extending the uncertainty about the sides’ willingness to make bilateral concessions.”

Investors might have been naively optimistic that the behemoth work needed to reach a deal would happen almost overnight. Now, Berry and Wizman say, markets may be wiser to settle in for the long haul: “The U.S.’s trading partners may try to run the clock out on Trump, thinking that concessions from the U.S. will be easier to come by as a U.S. slowdown deepens. The process, we expect, will be long and drawn out.”

This story was originally featured on Fortune.com

• President Donald Trump called on Federal Reserve Chair Jerome Powell to slash interest rates to avoid an economic slowdown. Still, “it remains to be seen how much rate cuts can actually stem the bleeding” when it comes to things such as consumer goods and housing, which are especially vulnerable to tariffs, a researcher said. Plus, if Trump were to fire the head of the central bank, it could backfire “spectacularly.” 

The president wants lower interest rates—that’s no secret. He has called on the central bank again and again to cut. “There can almost be no inflation, but there can be a SLOWING of the economy unless Mr. Too Late, a major loser, lowers interest rates, NOW,” President Donald Trump wrote on social media, referring to Federal Reserve Chair Jerome Powell. 

But it may not be so cut-and-dried. Neil Dutta, head of economic research at Renaissance Macro, warned the central bank can’t solve all when it comes to tariffs and trade wars. 

“Keep in mind that the Fed doesn’t really have the tools to offset a trade war,” Dutta said Monday on CNBC. “Think about the areas of the economy that the trade war affects the most. It’s things like consumer durable goods; it’s things like housing. These are industries that are actually quite affected by tariffs…so it remains to be seen how much rate cuts can actually stem the bleeding in those areas.”

Tariffs can induce inflation, but whether it happens to be a one-time shock to prices or an ongoing one remains to be seen. Tariffs can cause a slowdown, too, if consumer and business spending drops because things become costlier. Because of these factors, the Fed is currently in wait-and-see mode. It can’t cut interest rates in fear of inflation becoming a problem once again, but if unemployment becomes a problem, the central bank may have no choice. Either way, according to Dutta, interest-rate cuts may not shield consumer goods or housing from the tariff effect—and a slowdown is imminent, if it hasn’t already begun. 

“I think we’re jumping into recession,” he said. “We’re in it. We’re in it,” Dutta later said. 

He sees housing slowing more, investment spending dropping, and employment moderating. The only thing to stop the economy from plunging into a recession is a policy shift, he said, adding “once the confidence genie is out of the bottle, it’s really tough to put it back in.” 

“This is never an on and off switch with the president—it’s a dial,” Dutta continued. “So if he turns off the heat one week, I mean, it can be turned back on another week. So that kind of keeps this uncertainty situation roiling the markets, I think, for the foreseeable future.”

Things calmed somewhat after Trump hit pause on his liberation day tariff regime, which had fueled a selloff in the stock and bond markets. But almost two weeks since then, markets are still swinging, especially amid Trump’s verbal attacks against Powell. He recently said the Fed chair’s termination couldn’t come fast enough, and it has prompted discussion about whether Trump can or will actually fire the head of the central bank.

“We’re already in the worst-case scenario for the economy,” Dutta said. If Trump fires Powell and replaces him with someone more politically pliant, “it could be something that backfires on Trump spectacularly and would keep longer-term interest rates even higher than they otherwise are.”

This story was originally featured on Fortune.com