Former President Donald Trump has recently escalated his longstanding feud with Tesla CEO Elon Musk. Now, he’s promising to withhold government subsidies and contracts from the electric vehicle maker. The ex-President’s ire has deepened with the blowback from the GOP’s latest tax-cut and spend monstrosity. He has taken to social media to bash it, leaving little doubt that he is unhappy.
As Trump prepares for a significant trade meeting with China in London, alongside financial leaders such as Bessent, Lutnick, and Greer, he has made headlines with his remarks about Musk, calling him “crazy.” This wave of public shaming comes on the heels of Musk’s claims that Trump has been dishonest about their dealings. That rift is widening considerably, leading many to worry over what it could mean for Tesla. It further poses a profound question regarding the future of U.S.-China trade relations.
Fallout from Tax Measures
Trump’s recent irritation over the tax-cut and spending bill he signed has been exacerbating this rift between the two guys. Even stronger, the former president has condemned his administration’s implementation of these policies, admitting that they haven’t led to the promised economic rewards. His comments should be interpreted as an indication that there should be an attempt to reassess existing tax approaches, especially with 2023 deadlines looming.
Trump’s administration is eyeing a massive tax bill that would fundamentally reconfigure our nation’s economic landscapes. This bill adds a “kicker” for capital expenditures (Capex) and research and development (R&D) expensing. This policy proposal would affect all sectors of the economy from tech to advanced manufacturing, where building capacity for innovation is paramount.
Moreover, by extending the 2017 tax cuts, the Budget Reconciliation bill does exactly what Trump has endorsed—passing more of the 2017 tax cuts. As the potential for discord increases with Musk’s escalating vitriol, what this might mean for Tesla’s business operations is uncertain. The unpredictable nature of Trump’s fiscal policies should lead investors to reconsider their overall exposure to U.S. markets.
Tariff Tensions and Trade Talks
The latest round of Trump’s escalating trade war includes a widespread yet temporary tariff pause, expiring July 8. This 90-day break that’s being called “Liberation Day” is a huge relief. It also signals a troubling trend of overall increase of tariff rates in the near term. As Trump prepares to take on Chinese heavyweights in London, he is under increasing pressure, both at home and abroad, to get these negotiations right.
His administration’s proposals include Section 899. This section imposes tax retaliation against non-U.S. investors from countries that the United States deems to have “unfair” tax regimes. This would likely damage our relationships abroad and make it more difficult for Trump to get the trade results he wants. The potential re-implementation of the tariff pause by the end of the year makes these discussions all the more urgent.
Trump’s recent public remarks speak to his erratic nature on trade matters. Now he has teased a new escalation in his (not entirely original term) “tariff game of thrones.” Such a move would rattle global markets to their core. Investors are understandably laser-focused on these developments, as uncertainty has historically spurred flight-to-safety rotations away from U.S. exposure.
A Sour Bromance with Musk
The relationship between Trump and Musk, once the envy of pundits and bigwigs everywhere, has soured dramatically. While Trump has publicly praised both Tesla and Musk’s progressive ideas in the past, a surprising turn of events has shown that things have taken a dangerous turn. For the former president to accuse Musk of being “crazy” shows how badly the relationship and communication and trust have deteriorated.
In defense against Trump’s allegations, Musk has claimed that Trump is lying about what happened between the two. This very public spat is representative of the greater political storm business leaders have been forced to weather in this contentious climate. Given that both figures wield significant power in their respective arenas, a fight between the two could have an impact well past their individual animosities.
The impacts of this public feud go beyond how Tesla will fare going forward in competing for government contracts and grants, though. The threat of losing federal support could have significant repercussions for the company’s growth and its ability to compete in an increasingly competitive market.