Trump Intensifies Clash with Musk, Warns of Pulling Support for Tesla and SpaceX

The long-standing relationship between former allies Donald Trump and Elon Musk has taken a dramatic turn. In a sharp escalation, U.S. President Donald Trump on Tuesday threatened to withdraw federal subsidies and contracts awarded to Musk's companies, Tesla and SpaceX, amid a renewed public fallout over a tax-cut and spending bill.

Feud Ignites Over EV Tax Credit Cuts

The rift intensified after Musk criticized Trump’s tax-and-spending bill, which seeks to eliminate electric vehicle (EV) subsidies. Tesla has long benefited from such incentives, notably the $7,500 federal tax credit, which has made EVs more affordable for American consumers.

The bill passed narrowly in the Senate on Tuesday. Responding to Musk’s criticism, Trump said, “He’s upset that he’s losing his EV mandate… but he can lose a lot more than that,” hinting at broader consequences for Musk's businesses.

Tesla’s Deep Ties to Federal Incentives

Though Musk has publicly stated that subsidies should be phased out, Tesla has received billions in federal tax credits, loans, and incentives over the years. These benefits have supported its clean energy operations, EV production, and solar energy projects.

Programs targeted in Trump’s tax bill include key incentives that have propped up Tesla’s EV market leadership. The potential removal of these incentives has shaken investor confidence — Tesla’s shares dropped by over 5.5% on Tuesday alone.

Musk Pushes Back, Threatens Political Action

In response to Trump’s threats, Musk doubled down, calling for a complete halt to all federal subsidies: “I am literally saying CUT IT ALL. Now,” he posted on X (formerly Twitter). He also hinted at further escalation but noted, “I will refrain for now.”

Musk has previously floated the idea of forming a new political party and financing campaigns to oppose lawmakers who support Trump’s legislation. Despite once supporting Trump financially, Musk now appears ready to challenge the Republican establishment on fiscal and climate policy grounds.

Federal Contracts at Risk for SpaceX

Beyond Tesla, SpaceX is another major beneficiary of U.S. government contracts, with approximately $22 billion in current federal commitments for satellite launches and space missions. Trump suggested on Truth Social that cutting off such deals could result in major savings for the government:

“No more rocket launches, satellites, or electric car production, and our country would save a FORTUNE,” Trump wrote.

DOGE, the Government Efficiency Program, in Crosshairs

Musk was previously involved in a cost-cutting initiative known as the Department of Government Efficiency (DOGE). However, he distanced himself from the program in May. Trump joked to reporters: “DOGE is the monster that might have to go back and eat Elon.”

This comment underscores the president’s intent to reassert control over federal programs that Musk had once helped shape.

Challenges Mount for Tesla's Robotaxi Push

The feud could significantly affect Tesla’s robotaxi project, a key growth driver for the EV giant. The company is testing autonomous vehicles in Austin, Texas, but their mass deployment will depend on federal and state regulatory approval.

Analysts like Gene Munster from Deepwater Asset Management warned that if Trump follows through on these threats, it could jeopardize Tesla’s future:

“The substance of Tesla’s valuation is based on autonomy. That’s the risk.”

Potential Financial Blow to Tesla

According to J.P. Morgan analysts, the elimination of EV subsidies could slash Tesla’s 2024 operating income by $1.2 billion, or around 17%. Tesla has also relied on regulatory credit sales, earning nearly $11 billion from selling credits to legacy automakers — another revenue stream vulnerable to regulatory shifts.

Investor Concerns Grow Amid Political Turmoil

Gary Black, a veteran Tesla investor and fund manager at Future Fund LLC, sold his Tesla shares due to declining sales and political unpredictability. He commented:

“Not sure why @elonmusk didn’t see this coming after speaking out against Trump’s bill.”

Deportation Remark Adds Fuel to Fire

In a surprising statement, Trump was asked whether he might deport Musk, a naturalized U.S. citizen. The president replied cryptically, “I don’t know. We’ll have to take a look,” raising eyebrows and further complicating the political storm surrounding Musk.