Trump Threatens Musk Contracts as Feud Escalates
President Trump threatened to cut billions of dollars in federal contracts and tax subsidies for Elon Musk's companies on Thursday, the latest escalation in the growing feud between the two men.
'The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon's Governmental Subsidies and Contracts,' the president wrote on Truth Social. 'I was always surprised that Biden didn't do it!'
Last year, Mr. Musk's companies were promised $3 billion across nearly 100 different contracts with 17 federal agencies. Most of the contracts were for SpaceX, Mr. Musk's space technology company. Tesla, his electric vehicle company, also has contracts with the federal government.
But the relationship between the two men very publicly dissolved Thursday. Mr. Musk until last week was a top presidential adviser and has since turned into a critic of one of Mr. Trump's priorities. Mr. Musk has called the president's signature legislation currently moving through Congress a 'disgusting abomination.'
The two lashed out at each other from on their own social media platforms on Thursday.
'Elon was 'wearing thin,' I asked him to leave, I took away his EV Mandate that forced everyone to buy Electric Cars that nobody else wanted (that he knew for months I was going to do!), and he just went CRAZY!' Mr. Trump wrote on Truth Social.
Mr. Musk responded on X, the social media platform he owns, 'Such an obvious lie. So sad.'
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Elon Musk's feud with Donald Trump is hugely damaging to Tesla but don't expect any action from the board
How should a corporate board respond to a CEO publicly insulting and shaming a sitting president? It's not a question that most need to consider, since few chief executives dare to directly criticize the White House. When CEOs do speak out against a federal directive, their messages are usually delivered behind closed doors, or in a collective open letter. But this week, Elon Musk changed all that and forced the issue in a prolonged public spat with Donald Trump. The pair had a much-anticipated falling out over Trump's budget, also referred to as the 'big beautiful bill,' on Thursday, which quickly got personal. Musk asked his social media followers if it was time to create a new political party, said that Trump's tariffs would cause a recession, and even claimed that Trump's name was in government documents about Jeffrey Epstein, the convicted sexual offender. 'That is the real reason they have not been made public,' Musk wrote. The feud has already been costly for Musk and his many businesses, including Tesla. The automaker's shares took a tumble as the back-and-forth took over the news cycle, dropping 14% in on Thursday, and costing shareholders $150 billion. Now analysts warn that feuding with Trump could cost Tesla billions, considering that Trump could repeal electric vehicle tax credits and other measures that have boosted Tesla's earnings. The company could also face increasing regulatory obstacles around its autonomous driving vehicles, the technology that is meant to drive Tesla's future and has been cited by stock watchers as a reason for the stock's sustained eye-popping performance. Tesla bull and Wedbush analyst Dan Ives seemed to speak for investors early on Friday when he wrote in a research note: 'This needs to calm down.' At a regular company, there's a solid chance that the events of the last few days would spur a board to dismiss a CEO. But will the Tesla board fire Musk to protect public shareholders from potential damages? 'They should,' Charles Elson, founding director of the Weinberg Center for Corporate Governance at the University of Delaware, told Fortune. 'But they won't.' The Trump-Musk spat is just the latest in a series of events that have forced the question of what role Tesla's board actually plays in the company. 'Over the years, Musk's behavior has become more outrageous,' says Elson. 'The board's lack of response makes you wonder, 'Who are these people? Why are they there?'' It has long faced criticisms for being too close to Musk, and therefore willing to overlook numerous management issues. For instance, it famously approved Musk's much-disputed 2018 pay package for $56 billion, and has silently witnessed a year of high-profile divisive behavior from the chief executive that has led to public protests and customers distancing themselves from the company. And recent allegations about Musk's drug use echo reports that have surfaced in the past without putting Musk's role at risk. There are a few contributing factors as to why that is. Musk is a controlling shareholder in Tesla, where he holds 22% of the voting power, making it extra challenging for board members to have the votes needed to force him out. The board is also in a tough position in that firing Musk could tank the stock, considering that his name is so closely associated with the company. Many directors also have particularly close ties to Musk. That includes his brother Kimbal Musk, an entrepreneur and restaurant owner, and Joe Gebbia, a cofounder of Airbnb and a friend of Musk's. There are no car industry or green energy CEOs in the group, as one might expect at a typical EV company. The directors are also paid very well. This year, a Delaware court ordered the board to give back more than $900 billion in pay after finding it had paid itself too handsomely. Robyn Denholm, Tesla board chair since 2018, earned $600 million, far more than people with the same position at other companies. The court found 'the compensation was so significant, it made it really almost impossible for them to be independent directors,' says Elson. 'It is difficult to get a man to understand something when his salary depends on his not understanding it,' says Nell Minow, a corporate governance expert, quoting Upton Sinclair. 'That's this board.' To be sure, this year, there were signs earlier this year that Tesla's directors were taking more control over the company's governance. Last month, the Wall Street Journal reported last month that the board had begun looking for a successor and selected a search firm to assist them. It also reported that the board had met with Trump weeks before he announced he would be spending less time at the White House. 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Musk teases new US political party to rival Democrats and Republicans after public fallout with Trump
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In Musk v Trump, the markets will win
City AM columnist Rainer Zitelmann has been predicting a rift between Musk and Trump ever since the two started working together. Now that this has happened, the French daily newspaper L'Express has spoken to him again. The interview was conducted by Thomas Mahler. 'I never believed that the alliance between Elon Musk and Donald Trump would last,' you told L'Express in April. Why were you so certain that the alliance between the two men would fall apart so quickly? I have read every single biography about these two men and have been following their exploits closely for many years. Trump only tolerates people who completely subordinate themselves to him, whereas Musk won't bow to anyone. And especially not to someone he is so superior to both in terms of intelligence and as an entrepreneur. This is something I have stated on numerous occasions, including in an interview with L'Express in April. On top of that, Trump is not an advocate of economic freedom, his only two convictions are these: he is the greatest and should be all-powerful, and that tariffs are amazing. Trump thinks that tariff is the most beautiful word in the dictionary (which, by the way, is just as absurd as saying that taxes are the most wonderful word in the dictionary). Musk, in contrast, is in many ways a libertarian – he hates high taxes, tariffs, and excessive federal spending that ramp up U.S. debt. Tesla shares fell again after Musk's criticism of Trump's tax bill, and Trump threatened to cut public funding for SpaceX. As an entrepreneur, did Musk lose a lot with his political adventure? That may be the case – but no one can say for sure just yet. I admire Musk, he is driven by deep personal convictions and has consistently taken huge risks throughout his career. So far, those risks have always paid off. Whether Musk will prevail against Trump is debatable, because while Musk is a far superior entrepreneur, Trump outguns Musk in the field of political communication. If Musk were as politically desperate as Trump, he would go to China, which would quickly become the most successful nation in space exploration. If the European Union was not so stupid, it would offer Musk the opportunity to bring SpaceX to Europe on excellent terms. What would be the consequences for the US if they lose SpaceX? Without SpaceX, the US does not currently have much to offer. Prior to SpaceX, they couldn't even transport their own astronauts to the International Space Station and had to rely on outdated Russian rockets – and paid exorbitant prices to do so. In 2024, there were 134 SpaceX launches out of 261 space missions worldwide. If SpaceX were a country, it would easily surpass the second-largest, China, which had 68 launches. Notably, SpaceX is responsible for 86% of all U.S. launches and has delivered more than 80% of the world's total payload weight into orbit and beyond. Incidentally, there were just three launches in Europe. According to you, was Musk right to call Trump's funding bill a 'disgusting abomination'? Absolutely. Not because of the tax cuts – they're the right thing to do! But because Trump has thrown his weight behind a budget that dramatically exacerbates the national debt. Trump's funding bill is a continuation of the insane debt-fueled policies of Obama, Biden, and Trump's first term in office. Consequently, the US is spending more and more on interest payments. Musk must be deeply frustrated: he's neglected his companies for months to help the US government do something it is completely incapable of – namely, reducing the national debt, even just slightly, through the DOGE initiative. And then Trump turns around and backs legislation that does the exact opposite, massively expanding an already astronomical debt mountain. Does this mean that Trump will go even further in his obsessions for protectionism or immigration? Did the MAGA movement and Steve Bannon win the fight inside the Republican camp? It's too early to tell. But if Bannon did come out on top, it would be a disaster for the United States. Musk believes in political and economic freedom. Bannon, at heart, is a right-wing anti-capitalist. Are you worried about the US economy? Absolutely. Trump has promised the American people that his protectionist policies will bring about a new 'Golden Age.' That's complete nonsense. No country has ever become wealthy through protectionism – but many have become poor because of it. A hundred years ago, Argentina was as rich as the U.S., and then, over decades, Peronists drove it into poverty with their protectionist policies. My only hope lies in the capital markets – the stock and bond markets. If anyone can force Trump to change course, it will be the financial markets. I hope the markets prove to be stronger than Trump. Dr Rainer Zitelmann is a German historian, sociologist and author. His latest book is 'The Origins of Poverty and Wealth' Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
