The public unravelling of the alliance between Donald Trump and Elon Musk — once seen as one of the most powerful relationships in American business and politics — has rapidly turned into a high-stakes standoff with far-reaching consequences.
In a dramatic turn Thursday, Trump threatened to cancel federal contracts with Musk’s companies, jeopardizing the businessman’s vast government-dependent empire, including SpaceX and Tesla.
Meanwhile, Musk’s vocal opposition to Trump’s cornerstone legislative package has created a fissure within the Republican Party just as the bill moves through Congress.
As both men dig in, the political and financial stakes are mounting — not just for Musk and Trump, but for the broader markets, government projects and the Republican Party’s legislative agenda.
Musk’s SpaceX risks losing billions in federal contracts
Elon Musk, who heads Tesla, SpaceX and artificial intelligence startup xAI, has long been a favoured partner of the US government.
But that relationship is under threat.
On Thursday, after days of criticism from Musk, Trump said he would consider canceling billions of dollars in government contracts with Musk’s companies.
SpaceX in particular has enjoyed deep ties with NASA, the Pentagon and intelligence agencies.
It currently holds multibillion-dollar contracts to ferry astronauts, launch national-security payloads, and build vehicles for future moon missions.
Just two months ago, it won a $5.9 billion Pentagon deal and is part of NASA’s $4 billion program for moon landings.
In light of the President’s statement about cancellation of my government contracts, @SpaceX will begin decommissioning its Dragon spacecraft immediately
SpaceX has also secured deals with US intelligence agencies, including a $1.8 billion classified contract with the National Reconnaissance Office, which oversees the country’s surveillance satellites.
Musk had appeared poised to land even more lucrative government work under the Trump administration.
SpaceX, along with two partner firms, is vying for a role in the president’s proposed missile-defence initiative, dubbed the Golden Dome for America.
But with Trump now turning on the tech mogul, future contracts and ongoing collaborations hang in the balance.
“An administration official said Musk will find it extremely difficult to find a sympathetic voice in the Trump administration now,” The Wall Street Journal said in a report.
Tesla reels from market turmoil and regulatory threats
Tesla’s stock plummeted on Thursday, wiping out $152.4 billion in market value — its worst one-day decline ever following the public spat.
The drop compounds recent investor unease as Tesla’s sales weaken in the US and Europe.
Tesla’s plan to deploy a nationwide fleet of self-driving cars hinges on regulatory changes at the federal level — a shift Elon Musk has been actively lobbying for.
At present, individual states hold the authority to decide whether autonomous vehicles can operate on their roads.
Earlier this year, Transportation Secretary Sean Duffy visited Tesla’s factory in Austin and expressed support for a unified federal approach to self-driving rules.
But after Musk’s criticism of Trump’s bill, that support could falter.
Adding to Tesla’s vulnerability is its reliance on emissions credits.
The automaker sells these to other manufacturers to help them comply with environmental regulations.
Those credits are a significant source of revenue, but Trump-aligned lawmakers recently moved to kill California’s stricter emissions standards — a shift that could undercut EV adoption and Tesla’s bottom line.
Trump’s political gamble could backfire
Trump, meanwhile, is facing mounting pressure of his own.
His entire legislative agenda — a sweeping bill combining tax cuts, border security funding and social program reductions — is hanging by a thread.
It passed the House by a single vote, and any defection from Republicans in the next round could sink it.
Musk’s attacks, calling the bill a “disgusting abomination” and warning of a $2.5 trillion deficit increase, have added fuel to conservative critics’ concerns.
The entrepreneur has suggested he could support primary challengers to pro-bill Republicans and hinted he might form a new political party — a notion that gained traction with his massive online following.
Only three House Republicans have publicly backed Musk’s position so far, but even a few more could doom the bill’s chances.
Representative David Schweikert of Arizona, a fiscal hawk who missed the first vote, told The Wall Street Journal that that he wants “multiple changes” to the bill before he will support it.
“Is this the moment where Republicans and everyone in the country start to understand the threat and the scale of financing this debt?” said Schweikert, who is seen as vulnerable in the midterm elections next year.
On the debt, he said: “Musk is absolutely right.”
Still, most Republicans remain in Trump’s corner, viewing Musk’s attacks as potentially harmful to their cause.
A senior Republican on the Financial Services Committee warned that the feud could have lingering effects on Musk’s standing in Washington.
GOP fractures threaten midterm prospects
Beyond the immediate legislative fight, the Trump-Musk rupture could reshape the 2026 midterms.
The GOP holds a fragile House majority, and Trump had counted on Musk’s online army to galvanize support.
A lasting break could cost Republicans key districts and stoke internal divisions.
Musk’s musings about forming a new party underscore the depth of the split.
On Thursday, he asked his 220.5 million followers on X whether they would support a new political party.
By the end of the day, more than 80% of 3.5 million respondents had voted yes.
While such online polls are far from binding, they reflect Musk’s growing willingness to challenge the political establishment — even one he helped bolster in the last election, when he donated more than $250 million to support Trump.
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