Why QuantumScape Stock Is Plummeting Today

QuantumScape (NYSE: QS) stock is sinking in Wednesday's trading. The solid-state battery specialist's share price was down 9.5% as of 1:30 p.m. ET and had been down as much as 11.6% earlier in the session.

Before the market opened today, reports hit the wire that President-elect Donald Trump is considering declaring a national economic emergency when he enters office later this month. By declaring a national emergency, Trump would be able to utilize special powers through the International Economic Emergency Powers Act that allow the president to unilaterally set tariffs and shape other import policies.

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QuantumScape stock slumps on Trump tariff news

The stock market is seeing bearish pressures today in the wake of reports that Trump is contemplating the declaration of a national economic emergency in order to rapidly implement his tariff policies. While Trump campaigned on implementing new tariffs and has been expected to move forward along those lines as president, today's news suggests that his administration could be more aggressive with trade policy than previously anticipated.

The tariff dynamic has injected a new cause for uncertainty in the market and is causing investors to sell out of stocks with above-average risk profiles. QuantumScape's business is still in a pre-revenue state, and its valuation is tumbling as investors are taking more risk-averse positions today.

What comes next for QuantumScape?

In addition to valuation pressures that could be caused by investors pivoting away from risky, speculative stocks, QuantumScape could also face some business-specific challenges in relation to new tariff policies. While the company has yet to launch its solid-state batteries, increased tariffs could raise the company's production costs and decrease its margins in the event of an eventual commercial rollout.

On the other hand, QuantumScape stock likely still has a binary outcome. If the company's solid-state battery technologies prove to be dependable and commercially viable, the company's valuation will almost certainly soar above current levels. In controlled environments the company's technologies have been shown to offer significant advantages over traditional electric vehicle (EV) batteries and could deliver performance improvements that help speed overall EV adoption. But if that progress fails to materialize, the stock will likely crater.

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Keith Noonan has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.