United States: How the Trump-Musk Feud Shook Global Markets

This article examines the dissolution of the political and financial alignment between President Donald Trump and entrepreneur Elon Musk. The analysis focuses on the underlying structural factors and transmission mechanisms through which this rupture influenced financial markets and political dynamics.

Initially, the alliance between Mr. Musk and Mr. Trump appeared to be a natural progression within the contemporary political landscape, characterized by the increasing influence of technology platforms. Mr. Musk expressed commendation for Mr. Trump's efforts to reduce bureaucratic complexities, while Mr. Trump lauded Mr. Musk's contributions to American innovation through entities such as Tesla and SpaceX. During Mr. Trump's initial presidential term, Mr. Musk briefly served on advisory councils, subsequently resigning in protest following the United States' withdrawal from the Paris Agreement.

However, this mutual admiration underwent a transformation into rivalry as their respective political agendas encountered conflicting financial interests. Following Mr. Trump's suspension from Twitter in 2021 subsequent to the Capitol riots, he established his own digital platform, Truth Social. Concurrently, Mr. Musk acquired Twitter, subsequently rebranded as X, in 2022 and reinstated Mr. Trump's account. Nevertheless, Mr. Trump, constrained by an exclusivity agreement with Truth Social and exercising caution regarding the empowerment of Mr. Musk, declined to resume activity on X.

By 2024, the two individuals re-established an uneasy collaboration. Mr. Musk emerged as the primary individual contributor to Mr. Trump's presidential campaign, providing approximately $200 million to the "America PAC" according to publicly available financial disclosures. Mr. Trump's electoral victory in November led to Mr. Musk's appointment as head of the Department of Government Efficiency (DOGE), a designation widely interpreted as a symbolic yet impactful gesture. Mr. Musk was assigned the responsibility of auditing governmental bureaucracies and proposing artificial intelligence-based systems to enhance governmental efficiency, as reported by Politico on June 7.

The definitive rupture commenced with Mr. Trump's prominent legislative initiative in 2025, a comprehensive tax and spending proposal termed the "One Big Beautiful Bill." While ostensibly designed to mitigate the federal deficit and streamline taxation, the bill incorporated provisions that posed a threat to federal subsidies designated for electric vehicles and clean energy, both of which are critical to Mr. Musk's commercial ventures. Leaked Congressional Budget Office projections, obtained by Reuters, indicated that the bill would lead to a $2.4 trillion increase in the deficit over a decade, notwithstanding the proposed expenditure reductions.

In early June, Mr. Musk resigned from his advisory position. Shortly thereafter, he disseminated a severe critique on X, characterizing the bill as "a disgusting abomination" and "a threat to America's fiscal future." Within 24 hours, Mr. Trump responded on Truth Social, labeling Mr. Musk as "disloyal" and asserting his intent to terminate government contracts with companies associated with Mr. Musk, including Tesla and SpaceX. Mr. Musk escalated the dispute, claiming responsibility for Mr. Trump's electoral success and stating that without his support, Mr. Trump "would have lost." In a subsequent post, which was later deleted, Mr. Musk implied that Mr. Trump's name appeared in sealed Epstein files, although no corroborating evidence was provided. The political-technological alliance thereby formally dissolved. Mr. Trump addressed the situation during a press conference on June 6, stating, "Elon and I had a great relationship. I do not know if we will anymore. I have helped Elon a lot."

Financial markets, while impartial, react to volatility. As news of the dispute disseminated, Tesla shares experienced a 14.3% decline in a single trading day, resulting in a loss of approximately $150 billion in market capitalization. This represented the most substantial single-day decline for Tesla since 2022. Reuters reported that this decrease occurred immediately following Mr. Trump's threat to sever federal ties. SpaceX's valuation also decreased by $10 billion due to anticipated delays in NASA contracts. The Trump Media & Technology Group (TMTG), an entity affiliated with Mr. Trump, experienced an 8% decline as investors reacted to the heightened uncertainty. The Nasdaq composite index decreased by 0.8%, and even cryptocurrency markets were affected, with a Trump-themed meme coin, MAGACoin, reportedly losing over $100 million in capitalization within 12 hours. The Special Purpose Acquisition Company (SPAC) merger between Digital World Acquisition Corp. (DWAC) and Truth Social underwent increased scrutiny, leading analysts to downgrade its valuation due to the loss of exclusivity.

Analysts from Wedbush characterized the event as a "Twilight Zone moment," emphasizing that the convergence of political ramifications and prominent technological figures introduced systemic risk to retail investors and public trust. MarketWatch observed that both Mr. Trump and Mr. Musk "weaponized digital loyalty," causing uncertainty among analysts regarding the definition of reliable political capital within the attention economy. The algorithms responded in a viral manner. Mr. Musk's posts on X and Mr. Trump's posts on Truth Social dominated trending topics, news homepages, and cable news programming. The content, characterized by high stakes, emotional resonance, and personalization, was ideally suited for artificial intelligence-curated attention ecosystems.

Reports indicated that X's algorithm was adjusted in early 2023 to prioritize Mr. Musk's posts, increasing their reach by a factor of 1,000. Internal communications from Twitter engineers, initially published by Platformer, revealed that Mr. Musk demanded his posts receive greater visibility than those of President Biden during the Super Bowl, a request that resulted in manual elevation of his tweets. These same algorithmic mechanisms were subsequently utilized to amplify a public dispute between the Commander-in-Chief and the platform's owner to billions of global users.

The Republican Party, which had benefited from Mr. Musk's financial contributions and digital influence, encountered a dilemma. Lawmakers endeavored to express support for Mr. Trump's proposed legislation while simultaneously attempting to avoid alienating Mr. Musk. Speaker Mike Johnson affirmed Mr. Trump as "the unquestioned leader of our movement," while Senator Ted Cruz publicly advocated for reconciliation, stating on X that the world would be better "with the bromance fully intact."

Confidential reports suggest Mr. Musk attempted to initiate a phone conversation with Mr. Trump, a gesture that was rebuffed. Mr. Trump, addressing reporters, reiterated his stance, asking, "You mean the man who has lost his mind?" Senator Mike Lee posted, "Who else really wants @elonmusk and @realDonaldTrump to reconcile?" soliciting agreement from followers through reposts. Despite these damage control efforts, Republican strategists acknowledged to Politico that "Musk's donor base and Trump's populist machinery are now splitting the party's digital infrastructure."

This sequence of events transcends the personal disagreements between two individuals. It serves as a real-time illustration of the intricate interdependencies among political power, technology platforms, and financial markets, operating within algorithmic feedback loops. Mr. Musk's ownership of the platform's algorithm while actively participating in the dispute introduces additional layers of complexity. In 2021, following Mr. Trump's deplatforming, researchers observed a significant reduction in misinformation trends and incitement to political violence. A study conducted by the Stanford Internet Observatory noted that political misinformation decreased by over 73% subsequent to the suspension of prominent accounts after January 6. Conversely, Mr. Musk's reinstatement of Mr. Trump in 2022 led to a nearly 16% decline in shares of DWAC, Truth Social's parent SPAC, within one week, foreshadowing the more recent market downturn.

Presently, platforms do not merely disseminate or report news; they actively shape, amplify, and, in certain instances, directly monetize information. Bloomberg's June 6 newsletter commented, "If you are building political capital on someone else's feed, remember, he controls the feed." X's engineering team, which is significantly smaller than its pre-acquisition size, reportedly experiences difficulties in moderating high-volume political content, rendering the platform susceptible to coordinated digital escalations, as documented by The Wall Street Journal's live coverage on June 6. Political analysts are now cautioning against a new category of risk: not solely misinformation, but political instability precipitated by algorithmic amplification loops.

The dispute between Mr. Trump and Mr. Musk represents more than a public disagreement. It serves as a critical case study in 21st-century power dynamics, illustrating the convergence of social media reach, governmental authority, and economic consequences. Within a system where the owner of a communication platform can amplify a message through algorithmic adjustments, and the President can retaliate by influencing billions in government contracts, the implications extend beyond mere rhetoric.