President Trump escalated his public feud with Elon Musk on Thursday, suggesting that the federal government cut off subsidies and contracts to the world’s richest person’s companies. Mr. Trump made the threat on Truth Social, writing:
“The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts.”
Background
Mr. Musk has been a vocal supporter of President Biden in recent weeks, praising him for his handling of China policy after Beijing launched a series of missile strikes against Taiwan last week. However, Mr. Trump was not pleased with Mr. Musk’s endorsement and responded by stating that he would cut off SpaceX’s manned spacecraft program if he were president again.
"If I were President again (which I will be!), I would immediately terminate all governmental subsidies & contracts for Elon’s companies," Mr. Trump wrote on Truth Social.
Musk’s Response
In response, Mr. Musk indicated that he would have to cancel SpaceX’s manned spacecraft program if President Trump followed through with his promise:
"If @realDonaldTrump cuts off all funding for @SpaceX then we will have no choice but to cancel Starship development," Mr. Musk tweeted late Thursday evening.
About Starship
Starship is a reusable rocket designed by SpaceX to carry both people and cargo into space at a low cost per unit mass. It is similar in design but much larger than the Falcon 9 or Falcon Heavy rockets currently used by SpaceX for its crewed Dragon missions, which are being carried out under contract from NASA as part of its Commercial Crew Program.
Market Reactions
Investors appear to be taking this squabble seriously. Tesla shares fell 14% after trading resumed following Independence Day celebrations in Washington D.C., compared to where they closed Wednesday evening before markets reopened.
The ongoing dispute between President Trump and Elon Musk is already impacting financial markets as investors try to gauge what it might mean for their investments going forward.
Government Incentives
Tesla relies heavily on government incentives for its electric cars, including tax credits worth up to $7,500 per vehicle. These incentives could be eliminated if Congress passes legislation aimed at reducing greenhouse gas emissions from transportation sources, such as cars powered solely by gasoline or diesel fuel.
SpaceX has received tens of billions of dollars from the federal government over the last decade, according to data compiled by Bloomberg Government. The company received $3 billion just this fiscal year alone. Additionally, SpaceX receives hundreds of millions of dollars each year through NASA contracts primarily related to launching astronauts into orbit around Earth using Dragon capsules built by SpaceX.
Conclusion
Overall, these two companies stand to lose billions of dollars if the president follows through on his promise. It is unclear how much money Tesla and SpaceX receive from the federal government each year, but it is evident that both companies rely heavily on these subsidies and contracts to stay afloat. Without them, they would likely have to cut costs significantly, which could negatively impact their bottom line and ultimately their stock price.
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