June 13, 2025 —Elon Musk’s escalating feud with former ally Donald Trump is threatening to deliver a major blow to Tesla, as the electric vehicle (EV) maker faces the combined impact of new tariffs and the likely loss of federal tax credits — key pillars of its U.S. business strategy.Once seen as a close associate of Trump, Musk has grown increasingly critical of the former president’s “Big, Beautiful Budget Bill”, which aims to slash green energy spending and eliminate longstanding EV incentives. The dispute has now spilled into the public arena, raising alarms for Tesla investors and prompting a sharp sell-off in company stock.Tesla shares dropped 14% in a single trading session, erasing over $150 billion in market value, after Trump threatened to revoke federal contracts connected to Musk’s various businesses, including Tesla, SpaceX, and Starlink.Mounting Pressures on Multiple FrontsIndustry analysts warn that Tesla is now facing a “perfect storm”: • Tariffs: Trump’s renewed protectionist trade agenda could impose additional tariffs on Tesla’s global supply chain, affecting battery imports and key manufacturing components. • Tax Credit Elimination: The budget bill is likely to eliminate federal tax credits for EV buyers, potentially stripping Tesla of a critical pricing advantage at a time when competition in the U.S. market is intensifying. • Federal Contract Threats: Trump has publicly threatened to terminate federal subsidies and contracts awarded to Musk’s companies, although White House aides later suggested the administration is “moving on” from the feud — for now.Political IsolationThe breakdown in relations with Trump leaves Tesla politically vulnerable in Washington.“Tesla now finds itself without a strong political champion in either party,” said one policy analyst.“Democrats are alienated by Musk’s controversial stances, and Trump’s Republican allies are now targeting the very subsidies that helped fuel Tesla’s rise.”Musk’s outspoken criticism of Trump has also drawn attention to his wider ambitions, including Tesla’s push into AI and autonomous vehicles, sectors that depend on both regulatory support and government contracts.Long-Term OutlookDespite the political turbulence, many investors still view Tesla’s AI and robo-taxi development as key drivers of long-term value. However, execution risks remain high as regulatory battles and market uncertainty mount.For now, Musk appears undeterred, continuing to spar with Trump on social media while reaffirming his commitment to Tesla’s future. But with federal incentives under threat and tariffs looming, the road ahead could prove far more challenging for the EV giant.
