Trump-Musk Feud Explodes Into Full Government Contract War
What started as a policy disagreement over a spending bill has exploded into a full-scale public war between the President and his former "First Buddy." With billions in SpaceX contracts and Tesla's federal subsidies now on the chopping block, Elon Musk's wealth could take a devastating hit. The fallout is just beginning.
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Tesla shares plummeted 9% Thursday as the public feud between CEO Elon Musk and President Donald Trump reached a dangerous new level, with the commander-in-chief threatening to terminate billions of dollars in government contracts and subsidies across Musk's business empire. The dramatic selloff came after Trump declared from the Oval Office that he was "very disappointed" in Musk and suggested their once-close relationship might be permanently damaged, sending shockwaves through Wall Street as investors realized the world's richest man's companies could face unprecedented government retaliation.
The catalyst for Thursday's market rout was Trump's explosive Truth Social post threatening to cut off Musk's government lifeline, writing "The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon's Governmental Subsidies and Contracts." This threat carries enormous financial implications, as SpaceX alone holds a $4.46 billion NASA contract for human landing systems, while serving as a critical contractor for the Defense Department's satellite and launch services. The president's warning represents a stunning reversal for Musk, who had been considered Trump's closest business ally and led the Department of Government Efficiency until recently stepping back from his White House role.
The relationship between Trump and Musk began deteriorating when the Tesla CEO stepped up his criticism of the Republican tax-and-spending bill, calling it a "disgusting abomination" and urging Congress to "kill the bill." Musk argued the legislation "more than defeats all the cost savings achieved by the DOGE team at great personal cost and risk," referring to his work leading Trump's budget-cutting initiative. The public disagreement escalated when Trump responded from the Oval Office, telling reporters "Elon and I had a great relationship. I don't know if we will anymore," before suggesting Musk was primarily upset about the elimination of electric vehicle tax credits.
Musk's response was characteristically blunt, posting simply "Whatever" on his X social media platform before launching into a barrage of posts criticizing the president and the spending bill.
Beyond the immediate political fallout, Tesla faces significant financial headwinds that make the loss of government support particularly problematic. The House version of the budget bill proposes ending the popular $7,500 electric vehicle subsidy by the end of 2025, which could cost Tesla $1.2 billion in annual profit, while separate Senate legislation targeting California's EV sales mandates could result in an additional $2 billion hit to regulatory credit sales. These potential losses come as Tesla struggles with declining sales in key European markets and faces growing consumer backlash related to Musk's controversial political activities. Tesla shares have already fallen 12% since May 27, roughly coinciding with Musk's decision to step back from Washington activities, as investors grow concerned about the impact of his political involvement on the company's business prospects.
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While Tesla grabbed headlines with its stock decline, Musk's space ventures represent even larger targets for potential government retaliation, given their deep integration with federal agencies and defense contractors. SpaceX and Starlink dominate their respective markets and often serve as the default choice for commercial launches and satellite internet deployment, with foreign governments increasingly relying on Starlink services that have benefited from regulatory approvals smoothed by Musk's previous ties to Trump. The threat to terminate these contracts could have far-reaching implications beyond Musk's companies, potentially affecting national security capabilities and America's competitive position in the global space economy. Any actual move to cancel existing contracts would likely face legal challenges and could disrupt critical government operations that have become dependent on SpaceX's unique capabilities.
The public breakdown between two of America's most influential figures is sending ripples throughout the technology and defense sectors, as investors attempt to assess the broader implications for companies with significant government exposure. Tesla shareholder Dennis Dick noted that "Elon's politics continue to harm the stock. First he aligned himself with Trump which upset many potential Democratic buyers. Now he has turned on the Trump administration," highlighting how Musk's political activities have alienated customers across the political spectrum. The feud also raises questions about the stability of other public-private partnerships and whether political disagreements could impact government contracts for other major corporations. Market analysts are closely watching whether this conflict represents an isolated incident or signals a broader shift in how the Trump administration handles relationships with business leaders who step out of line.
This unprecedented clash between a sitting president and the world's richest entrepreneur creates both massive risks and potential opportunities that could reshape multiple sectors in the coming months. Smart investors are recognizing that the outcome of this feud could determine not just Tesla's future, but the entire landscape for government-dependent technology companies and defense contractors. The volatility surrounding Musk's empire presents a unique moment where those who can correctly anticipate the resolution of this conflict stand to benefit enormously, whether through identifying undervalued opportunities in the chaos or positioning for the inevitable market moves when political winds shift again.
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