The public feud between former President Donald Trump and billionaire Elon Musk has sent shockwaves through Wall Street, with Tesla shares plunging 14.26% in a single day – their worst drop in four years. The tech-heavy Nasdaq fell 0.83% while the S&P 500 declined 0.53% as investors grew wary of the political uncertainty.
The “Big and Beautiful” Act: Center of the Controversy
The recently passed House bill proposes sweeping changes to tax and spending policies:
- Making permanent the 2017 tax cuts set to expire in 2026
- Expanding child tax credits and retirement benefits
- Cutting $600B from Medicaid and $260B from food assistance programs
- Introducing new taxes on remittances and immigration services
- Eliminating EV subsidies while imposing new fees
Trump’s Defense vs Musk’s Criticism
Trump hailed the legislation as key to economic revival, while Musk called it “despicable,” warning it would:
- Add $2.5 trillion to the deficit
- Undermine government efficiency efforts
- Create long-term fiscal instability
Broader Market Concerns Beyond the Feud
Economists highlight deeper structural issues:
Debt Crisis Looms
With $36.22 trillion national debt (124.1% of GDP), interest payments may consume 40% of tax revenues by 2033. Moody’s warns of potential downgrade risks.
Twin Deficits Spiral
The 6.95% fiscal deficit could worsen as trade imbalances persist, creating economic vulnerabilities.
Manufacturing Challenges
Critical supply chain dependencies – 90% in semiconductors, 70% in rare earths – threaten production stability.
Market Outlook: Storm Clouds or Silver Linings?
While Tesla faces particular risks from political backlash (82% of Democratic supporters reportedly boycotting the brand), the broader market shows resilience:
- US debt-to-GDP remains below many developed nations
- Core inflation shows signs of easing
- Dollar maintains 42% global payment share
- Tech sector continues attracting investment
Potential Scenarios Ahead
If stagflation emerges, significant corrections may occur. However, any economic slowdown could prompt Fed easing, potentially reigniting the AI-driven tech rally that’s already delivered 20% returns for some investors since recent lows.
The Trump-Musk clash reflects deeper tensions between business and government, creating short-term volatility but unlikely to derail America’s innovation-driven market fundamentals in the long run.
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