Tesla Shares Slide Amid Musk–Trump Fallout: Market Reacts To Political Tensions And Subsidy Threats

Tesla shares plunged 17% on Thursday following a very public rift between CEO Elon Musk and former U.S. President Donald Trump. The sharp decline was driven by escalating tensions between the two influential figures, as both traded criticism over policy, personal conduct, and political allegiance.

Trump, responding to Musk’s critique of his latest tax proposal, lashed out on Truth Social, threatening to terminate government contracts and subsidies benefiting Musk’s businesses. “The easiest way to save money in our Budget… is to terminate Elon’s Governmental Subsidies and Contracts,” Trump wrote, adding that Musk had “gone CRAZY” after losing key EV mandates and tax incentives under Trump’s energy policy revisions.

Musk, who had once been a vocal Trump supporter and a major Republican donor in the 2024 election cycle, referred to the president’s new bill as a “disgusting abomination” on his platform X. He argued that the proposed legislation undermines efforts led by the Department of Government Efficiency (DOGE), a group he has reportedly advised. The public fallout adds to political uncertainties already weighing on Tesla stock.

Broader Impact on Musk’s Business and Investor Sentiment

The consequences of the feud appear to extend beyond Tesla. Market analysts point out that investor confidence is being shaken not just by the loss of potential EV subsidies, but also by Musk’s increasing politicisation. Dennis Dick, chief strategist at Stock Trader Network, noted, “Elon’s politics continue to harm the stock. First he aligned with Trump, now he has alienated him. It’s upsetting both sides of the political aisle.”

Since May 27, Tesla shares have declined 12%, with the latest drop compounding losses already accumulated this year. The company’s stock is down 22% year-to-date, reflecting heightened investor caution around political exposure and potential regulatory shifts. Despite these challenges, Tesla remains the most valuable automaker globally with a valuation near $1 trillion, though it trades at a high 140x forward earnings multiple.

Meanwhile, other Musk-led ventures such as SpaceX and Starlink may also face greater scrutiny due to their reliance on regulatory approvals and federal partnerships.