Counting Up the Potential Costs of the Trump-Musk Rift

by

Andrew here. Wow. The Musk-Trump relationship detonated in spectacular fashion yesterday. We have the full play-by-play below — but more important, we take a look at the real-life implications of the rift, even if the two eventually reach a truce.

While Tesla’s market value dropped over $150 billion yesterday, Musk’s businesses and their investors could be further hammered if Trump uses his administration to inflict further retribution. And what if Musk tries to withhold SpaceX and Starlink technology from the government? Meanwhile, Musk rivals, including Sam Altman, Jeff Bezos and Bill Gates, are probably breathing a sigh of relief, while prominent allies of both men, such as the crypto czar David Sacks and Katie Miller, the wife of the senior Trump adviser Stephen Miller, might get caught in the crossfire.

And here’s something I’ve been thinking about overnight (and would love your feedback on): Does Musk’s outburst open a floodgate of pent-up criticism from other C.E.O.s who have held their tongue? Or is the possibility of retribution, as seen with Tesla’s share price, just more reason to stay silent?

The world was riveted on Thursday when President Trump and Elon Musk clashed — repeatedly, bitterly and sometimes pettily — online and in the Oval Office, in a dramatic rupture of their alliance that many believed was inevitable.

There were signs of a cool down on Friday. There’s a lot at stake in Musk and Trump making amends, including for Musk’s businesses, his rivals and perhaps Republicans’ fortunes. No matter what happens, one of the most consequential political alliances in decades may be irrevocably damaged.

The highlights: After days of Musk assailing the Republican policy bill, a centerpiece of Trump’s economic agenda, the president let loose on Thursday: “I’m very disappointed in Elon,” he said, adding that he would have won Pennsylvania in the 2024 election without the Tesla chief’s millions.

Things then got more heated:

  • “Without me, Trump would have lost the election, Dems would control the House and the Republicans would be 51-49 in the Senate,” Musk wrote on X.

  • “The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts,” Trump wrote on Truth Social. “I was always surprised that Biden didn’t do it!”

  • Musk responded that he was prepared to decommission the SpaceX Dragon spacecraft that NASA uses to get astronauts to the International Space Station, though he later backed off.

  • “Elon was ‘wearing thin,’ I asked him to leave, I took away his EV Mandate that forced everyone to buy Electric Cars that nobody else wanted (that he knew for months I was going to do!), and he just went CRAZY!,” Trump added.

  • Musk claimed that there were references to Trump in government documents about the late financier and sex offender Jeffrey Epstein. “Have a nice day, DJT!” Musk wrote.

Observers of all political persuasions weighed in. “BBB actually stands for Big beautiful breakup,” the conservative activist Laura Loomer wrote on X, referring to the Republicans’ One Big Beautiful Bill Act. Representative Alexandria Ocasio-Cortez, Democrat of New York, said, “The girls are fighting, aren’t they?” (It’s an allusion to a meme.)

Even Kanye West weighed in: “Broooos please noooooo 🫂 We love you both so much.”

Tempers appear to be cooling. Responding to a plea for peace by the billionaire Bill Ackman, Musk responded, “You’re not wrong.” But news reports were contradictory about whether the two will speak on Friday; Trump told ABC’s Jonathan Karl that he’s “not particularly” interested in talking with Musk.

The consequences of a failed truce are gigantic:

  • Tesla’s stock price plunged 14 percent on Thursday, wiping out over $150 billion from its market cap, its worst-ever one-day performance. Beyond the loss of the E.V. subsidies the Republican bill would eliminate, investors feared that Trump regulators could crack down on Tesla’s robotaxi efforts.

  • The prospect of SpaceX losing even some of its government contracts would hurt. (That possibility likely delighted rocket rivals including Jeff Bezos of Blue Origin and Kelly Ortberg of Boeing.) Meanwhile, what if Musk followed through on the decommissioning of the Dragon spacecraft — or even disabled the U.S. government’s access to the Starlink internet service?

  • Could a drawn-out fight mean that Trump would somehow hamstring xAI even as he champions other American artificial intelligence companies? Sam Altman of OpenAI was probably feeling relieved that Musk wouldn’t be able to interfere in his ambitious initiatives.

  • Republican leaders may also be hoping that a détente might lead to Musk dialing down his attacks on their budget bill. That said, the billionaire still appears dead set against the legislation: “If America goes broke, nothing else matters,” he wrote on X on Friday.

Washington and Beijing plan more trade talks. That comes after a phone call on Thursday between President Trump and China’s leader, Xi Jinping. Trump called the conversation “very positive” — he added that both countries had extended invitations for in-person talks — and implied the two were making progress in resolving a major sticking point: China’s halt of critical mineral exports.

Harvard scores another legal win in its clash with Trump. A federal judge in Massachusetts temporarily suspended the president’s ban on Harvard enrolling foreign students. The judge also extended by approximately two weeks a previous order allowing Harvard to issue certain types of student visas.

A Supreme Court decision could have a major effect on workplace discrimination cases. The justices unanimously ruled in favor of a straight woman who said she had twice lost positions to gay workers, striking down lower court rulings that she had to meet a higher burden because she was a member of a majority group. Experts say the ruling could upend affirmative-action guidelines and other protections in the workplace.

While the clash between Elon Musk and President Trump captivated Washington on Thursday, another drama was playing out behind closed doors over a bill to regulate the $250 billion market for stablecoins, which could transform America’s relationship with the dollar, upend the credit card industry, and benefit both Musk and Trump.

The bill, the GENIUS Act, is poised to pass the Senate within days. But a prominent Republican, Senator Josh Hawley of Missouri, revealed first to DealBook that he will vote against the bill in its current form, warning that it would give tech giants too much control of America’s financial system.

“It’s a huge giveaway to Big Tech,” Hawley told Grady McGregor. Hawley, who previously voted against the bill, is concerned that the legislation would allow tech giants to create digital currencies that compete with the dollar.

And he fears that such companies would then be motivated to collect even more data on users’ finances. “It allows these tech companies to issue stablecoins without any kind of controls,” he said.

Similar worries scuttled an effort by Meta to get into stablecoins. In 2019, Jay Powell of the Fed, among others, raised “serious concerns” about Meta’s cryptocurrency initiative. It abandoned the project in 2022.

The GENIUS Act has exposed divisions in both parties:

  • Democrats like Senator Elizabeth Warren of Massachusetts oppose the bill, warning it would be a boon for Trump, whose family announced its own USD1 stablecoin in March.

  • But Senator Kirsten Gillibrand, Democrat of New York and a co-sponsor of the bill, has argued that it would provide regulatory clarity to the industry, and that the legislation includes “robust consumer protections.”

  • Senator Bill Hagerty, Republican of Tennessee and a co-sponsor, said the bill would bolster demand for U.S. Treasury notes and bonds, as well as the dollar. Stablecoins are often backed by short-term U.S. Treasuries and dollar deposits.

  • Other Republican skeptics in the Senate include Rand Paul of Kentucky, John Kennedy of Louisiana and Jerry Moran of Kansas. Paul has argued that the bill would add needless federal regulations.

The back story: Weeks ago, Hawley’s office submitted an amendment that would place limits on Big Tech’s push into stablecoins. Hawley’s draft amendment was used as the basis for writing a new provision requiring that publicly listed, nonfinancial companies such as Meta secure approval from a new regulatory body called the Stablecoin Certification Review Committee before it could issue stablecoins.

That provision has gained traction with other senators. But Hawley says Republican negotiators “gutted” key parts of his amendment that would safeguard against the risks of letting tech companies issue their own digital currencies and that he no longer supports it. “It’s essentially window dressing,” he said.

Some Democrats oppose the proposed guardrails, but for another reason: that they could benefit Musk, DealBook hears. These lawmakers worry that private companies including Musk’s X and OpenAI would not have to undergo the more stringent regulatory vetting process.

Such companies “could issue stablecoins with abandon, and that seems tailor-drafted for Elon Musk and his X platform,” Hilary Allen, a professor at American University’s Washington College of Law, told DealBook. Musk recently announced that X Money, a crypto token designed for payments on his social media platform, would enter beta testing soon. (X Money did not respond to a request for comment.)

Democrats plan to introduce an amendment that would bar Big Tech companies — publicly traded and private — from creating their own stablecoins, according to a person with knowledge of the plan. Hawley said he would support such an amendment but was skeptical of its prospects.

— Dario Amodei, the C.E.O. of Anthropic. In a Times Opinion essay, he calls for creating a federal “transparency standard” for A.I. companies that would require policies for testing models and disclosing risks they may pose.

The stablecoin issuer Circle burst through the I.P.O. doldrums this week, raising more than $1 billion in a wildly successful listing that has the crypto sector and Wall Street buzzing.

Its shares soared nearly 170 percent in their first day of trading on Thursday, one of the best debuts for a crypto company since Coinbase’s in 2021.

Circle’s I.P.O. comes as President Trump and his sons have entered the stablecoin business, and a bill championed by the industry, the GENIUS Act, winds through Congress. DealBook spoke with Jeremy Allaire, Circle’s C.E.O., about what lies ahead for him and the company.

On getting the I.P.O. timing right:

“We published our S1 publicly the day before ‘Liberation Day.’ And I think our view was that, in the current environment, no one knows what’s going to happen, it’s impossible,” Allaire said. “But what we do know is we have a highly compelling company that is executing into a market that is growing, that’s getting all this regulatory clarity.”

On whether lawmakers have sufficiently addressed concerns about allowing foreign-based stablecoin companies to trade on U.S. exchanges:

“We feel like the GENIUS Act as it stands today is an excellent piece of legislation. It has a high bar from a regulatory perspective, for anyone who’s going to issue, offer, sell payment stablecoins in the United States.”

On rumors that Circle could be acquired:

“I’ve made clear that we’re focused on being a long-term independent company.”

Deals

Tech and artificial intelligence

Best of the rest

We’d like your feedback! Please email thoughts and suggestions to [email protected].

Leave a Comment