Elon Musk, once a strong critic of Donald Trump during the 2016 U.S. election, later shifted from his Democratic Party roots to support Trump’s second-term policies, particularly in tax cuts and deregulation, which aligned with his business interests.
Initially, their relationship grew from mutual respect into a political alliance, culminating in Musk backing Trump’s reelection campaign with nearly $300 billion (€263 billion). Upon Trump's return to the White House, Musk took up an advisory role, leading the controversial Department of Government Efficiency (DOGE), tasked with reducing public spending. This involvement led to investor concerns, causing Tesla’s stock price and auto sales to take a hit. Following months of pressure, Musk agreed to scale back his role in Trump’s government.
What Led to the Public Feud?
On Thursday, Musk—sporting a “The Dogefather” T-shirt—had what started as a cordial farewell at the Oval Office. However, tensions quickly escalated when Trump reacted to Musk’s criticism of his tax and spending bill, which Musk had labeled “fiscally reckless” and a “disgusting abomination”.
The feud intensified when Musk accused Trump of alleged links to child sex offender Jeffrey Epstein, prompting Trump to threaten revoking Musk’s federal contracts, potentially costing Musk’s business empire billions. Their dispute spilled onto social media, with both men repeating their heated exchanges. At one point, Musk even announced the decommissioning of SpaceX’s Dragon spacecraft, before seemingly backtracking.
Market Reaction to the Fallout
On Thursday, Tesla’s stock plummeted, losing $150 billion in market value—the biggest single-day drop in the company’s history—closing down over 14%.
However, Politico later reported that Trump and Musk were scheduled to talk, calming investors and boosting Tesla’s pre-market value by 5%. Despite this, a White House official denied any planned calls, stating that Trump may even sell his Tesla in solidarity with anti-Musk protests.
Tesla’s stock volatility has been evident throughout the year, particularly post-election. While shares peaked at $428 in January, they slumped nearly 50% in March, largely due to investor concerns over Musk’s role in Trump’s administration. A brief recovery followed Trump’s tariff pause and U.S. regulators easing self-driving vehicle rules.
What’s at Stake for Musk’s Companies?
Trump’s budget plans and his feud with Musk have created uncertainty around the future of Musk’s business empire.
Tesla faces a major setback, with Trump aiming to cut a key electric vehicle subsidy worth $7,500 per buyer—despite Musk’s aggressive lobbying to retain it. Bloomberg reports suggest that losing this credit could reduce Tesla’s annual profit by $1.2 billion. Additionally, state-level subsidy cuts could further dent Tesla’s revenues. However, this could temporarily boost EV demand, as consumers rush to purchase vehicles before subsidies expire.
Trump’s tariffs also pose a challenge, as Tesla relies on Chinese parts for its Cybercab robotaxi and Semi electric truck.
Meanwhile, Trump’s threat to revoke SpaceX’s federal contracts could have severe financial consequences and impact U.S. space missions. Since 2000, SpaceX has secured over $22 billion in contracts from the Defense Department and NASA.
Terminating these agreements would disrupt government operations, particularly because SpaceX’s Crew Dragon is currently the only U.S. spacecraft certified to transport astronauts to the International Space Station (ISS).
Additionally, Trump’s budget cuts might affect Starlink, Musk’s satellite internet service, which is deployed in rural areas and U.S. military bases. Ending Pentagon contracts could harm both parties, as Starlink supports disaster response and military communications.
The ongoing Trump-Musk conflict, alongside shifting policies, could shape the future of Musk’s businesses and the broader U.S. tech landscape.
