Trump escalates feud with Musk, threatens Tesla and SpaceX support

WASHINGTON - US President Donald Trump on July 1 threatened to cut off the billions of dollars in subsidies that Mr Elon Musk’s companies receive from the federal government, in an escalation of the war of words between the President and the world’s richest man, one-time allies who have since fallen out.

The feud reignited on June 30 when Mr Musk, who spent hundreds of millions of dollars on Mr Trump’s re-election,

renewed his criticism of Mr Trump’s tax-cut and spending Bill

, which would eliminate subsidies for electric vehicle (EV) purchases that have benefited Tesla, the leading US EV maker. 

“He’s upset that he’s losing his EV mandate and… he’s very upset about things, but he can lose a lot more than that,” Mr Trump told reporters at the White House on July 1.

Mr Musk's businesses, especially Tesla and SpaceX, are highly dependent on an array of federal contracts, policies, subsidies and credits that have provided the companies tens of billions of dollars in revenue over the years. Some of these benefits for Tesla, including consumer tax credits for EV purchases, were already on the chopping block in Mr Trump’s tax Bill.

Tesla shares dropped 4 per cent in early trading on July 1.

The Tesla chief executive renewed threats to start a new political party and spend money to unseat lawmakers who support the tax Bill despite campaigning on limiting government spending.

The Senate approved the Bill on July 1 by a narrow margin, and it will now return to the House of Representatives for approval.

It is unclear how much sway Mr Musk has over Congress, or what effect his opinions might have on the Bill's passage.

But Republicans have expressed concern that his on-again, off-again feud with Mr Trump could hurt their chances to protect their majority in the 2026 midterm congressional elections.

Treasury Secretary Scott Bessent pushed back on Mr Musk’s criticism that the Bill would balloon the deficit, saying “I’ll take care of” the country’s finances.

Mr Musk spearheaded the Department of Government Efficiency (Doge), aimed at cutting government spending, before he pulled back his involvement in late May.

Mr Trump on Truth Social on July 1 suggested Mr Musk might receive more subsidies “than any human being in history, by far”, adding: “No more Rocket launches, Satellites, or Electric Car Production, and our Country would save a FORTUNE.” 

Mr Trump later doubled down, telling reporters with a smile: “Doge is the monster that might have to go back and eat Elon.”

In response to Mr Trump’s threats, Mr Musk said on his own social media platform X: “I am literally saying CUT IT ALL. Now.”

He later added that he could escalate the exchange with Mr Trump but said: “I will refrain for now.”

Challenges to Tesla

The feud could create new challenges for Mr Musk’s business empire, particularly as the EV maker – his primary source of wealth – bets heavily on the success of its robotaxi programme currently being tested in Austin, Texas. 

The speed of Tesla’s robotaxi expansion depends heavily on state and federal regulation of self-driving vehicles. 

Analysts were expecting another rough quarter as Tesla was set to report second-quarter delivery figures on July 2.

Sales continued to slide in several major European markets, data showed July 1, as Mr Musk’s embrace of hard-right politics has alienated potential buyers in several markets worldwide.

The US Transportation Department regulates vehicle design and will play a key role in deciding if Tesla can mass-produce robotaxis without pedals and steering wheels, while Mr Musk’s rocket firm SpaceX has about US$22 billion (S$28 billion) in federal contracts. Tesla also gets regulatory credits for selling EVs; the company reported US$2.8 billion in those credits in the 2024 fiscal year, which could be cut sharply under the tax Bill.

Mr Trump had in early June threatened to cut Mr Musk’s government contracts when their relationship erupted into an all-out social media brawl over the tax-cut Bill, which non-partisan analysts estimate would add about US$3 trillion to the US debt. 

The subsequent sell-off in Tesla shares erased US$150 billion in market value, as investors feared a tougher regulatory road for the self-driving robotaxi that underpins much of the company’s valuation. The stock recovered after

Mr Musk walked back some of his comments

. 

The truce was short-lived, however, with Mr Musk on June 28 calling the tax Bill “utterly insane and destructive” in a post on X.

He said lawmakers who voted for the bill after campaigning on cutting spending “will lose their primary next year if it is the last thing I do on this Earth”.

Mr Musk has argued that the legislation would greatly increase the national debt and erase the savings he says he achieved through Doge. 

Said Stock Trader Network chief strategist Dennis Dick, who holds Tesla shares: “Musk cannot stop himself. He is getting on Trump’s bad side again. Tesla international sales have fallen significantly and if he loses US subsidies, US sales are likely to fall as well.

“Musk needs Trump, Trump does not need Musk.”

Asked if he was going to deport Mr Musk, a naturalised US citizen, Mr Trump told reporters as he left the White House on July 1: “I don’t know. We’ll have to take a look.” REUTERS