Elon Musk’s public feud with Trump threatens Tesla, SpaceX and $38 billion in govt ties

In the wake of the 2024 election, Musk had poured at least $288 million into backing Trump and other Republicans

Elon Musk’s once seemingly unstoppable influence in Washington has been shaken by an escalating public feud with President Donald Trump, threatening billions of dollars in federal contracts that have helped fuel Musk’s rise as the world’s richest man, the Washington Post reported.

In the wake of the 2024 election, Musk had poured at least $288 million into backing Trump and other Republicans, earning him a front-row seat in Trump’s Washington. Tesla’s stock initially soared, and government support for Musk’s ventures — from SpaceX’s Mars missions to Tesla’s robotaxis — looked more promising than ever. Now, that carefully cultivated position is unravelling.

A fallout with serious stakes

Last week, Trump raised the stakes by publicly threatening to cancel federal contracts with Musk’s companies. The message sent shock waves through federal agencies that rely on SpaceX for critical missions, and erased an estimated $34 billion from Musk’s net worth, the second-largest one-day loss ever recorded by Bloomberg’s Billionaires Index.

“It will come down to how much pain does Trump want to inflict,” said Gene Munster, an analyst at Deepwater Asset Management.

Musk appeared to attempt a de-escalation over the weekend, deleting some of his harshest posts about Trump from his social media platform X. But Trump warned of “very serious consequences” should Musk back Democrats, and Musk’s suggestion of starting a new political party further complicates the relationship.

Tesla faces growing financial strain

Tesla, the primary source of Musk’s wealth, is already reeling from the fallout. Shares are down more than 20 percent this year, and profit plunged 71 percent in the latest quarter as the company contended with political blowback and slowing sales.

Trump’s proposed tax and spending plan would eliminate the $7,500 federal tax credit for electric vehicle buyers — a potential $1.2 billion hit to Tesla’s annual profit, according to JPMorgan analysts.

Tesla is also facing federal scrutiny over its driver-assistance technology. The National Highway Traffic Safety Administration recently requested details on the company’s upcoming robotaxi launch. Meanwhile, shareholder frustration is mounting. A group of activist Tesla investors last week demanded that Musk commit at least 40 hours per week to the EV maker after devoting much of the past year to political ventures.

“This should be a wake-up call for all Tesla shareholders watching silently from the sidelines,” said Brad Lander, New York City comptroller, who oversees public pension funds that lost an estimated $150 million in a single day due to the Musk-Trump clash.

SpaceX and Neuralink in the crosshairs

SpaceX, long dependent on federal contracts, is also exposed. While procurement officials say cancelling those contracts is unlikely, Trump’s threat underscored SpaceX’s reliance on NASA and the Pentagon. The company flies astronauts to the International Space Station and launches sensitive satellites for U.S. intelligence agencies.

Tesla investor Ross Gerber warned that losing government backing could cut SpaceX’s value in half.

Musk’s other ventures, including AI startup xAI and brain-chip company Neuralink, also face risks. Both operate in heavily regulated spaces where Musk’s now-precarious standing in Washington could complicate future approvals.

A relationship on the brink

Just months ago, Musk was a central figure in Trump’s Washington, overseeing the controversial U.S. DOGE Service and appearing at White House events. Investors hoped his alliance with Trump would ease regulatory scrutiny and open doors for lucrative contracts.

That alignment stood in sharp contrast to Musk’s fraught relationship with former president Joe Biden, who had snubbed Tesla at a White House EV event. Under Trump, Musk seemed poised to benefit — until last week’s highly public spat.

Now, investors fear Musk is jeopardizing years of political capital. “You cannot get up in the morning and just spit on all your friends and people who literally create the success that you have,” said Gerber, who sold half of his Tesla stake last week.

As Musk bets on an imminent robotaxi launch to reverse Tesla’s fortunes, the stakes for his business empire — and his future in Washington — have never been higher.