Elon Musk had nothing to say last week after President Trump threw global financial markets into chaos and sparked renewed fears of a global recession with his ‘reciprocal tariffs’ announcement.
TOPSHOT – US President Donald Trump and Elon Musk (R) speak before departing the White House on his way to his South Florida home in Mar-a-Lago in Florida on March 14, 2025.
AFP via Getty Images
Musk has since found his voice—and is making clear his opposition to Trump’s signature economic policy. On Saturday Musk said that he’d like to see the U.S. and Europe move toward a zero tariffs agreement. On Sunday he blasted Trump’s trade advisor Peter Navarro for praising tariffs. On Monday, he shared a video of economist Milton Friedman extolling the benefits of free trade. He even made personal appeals to Trump over the weekend, according to a Washington Post story, which went nowhere. For good measure, his brother Kimbal Musk, a large Tesla shareholder, called Trump “the most high tax American President in generations.”
It’s no great wonder why Musk is unhappy. Tariffs are bad for business, and really bad for the businesses of the world’s richest man. Tesla’s stock has fallen 17% since Trump’s reciprocal tariffs announcement. SpaceX, which is privately held, faces rising costs across its supply chain and unhappy international clients.
Musk’s artificial intelligence startup xAI, tunnel builder Boring Co, and brain implant firm Neuralink will also face rising costs and supply chain disruptions. In the case of his social media company X, it faces a probable decrease in ad spending if fears of a recession come true, on top of an impending fine by EU regulators for violating a law on illicit content and disinformation that could top $1 billion.
Here is how Musk’s three biggest businesses would get slammed by Trump’s tariffs.
Tesla (Value of Musk’s Stake: $130 billion)
Long the biggest source of Musk’s fortune, Tesla ceded that spot to SpaceX last month; the value of Musk’s stake has more than halved from its $266 billion peak in December. Tesla’s global sales are in retreat, not only because of backlash to Musk’s role in the Trump administration, but growing competition in China, Tesla’s biggest market, from domestic EV makers like BYD.
Trump’s tariffs are about to make Tesla’s reality even more painful.
Like most large manufacturers, Tesla relies on global supply chains for the raw materials that go into its vehicles. Government data from the end of last year show that Tesla imports between 20 to 25% of car parts from foreign suppliers (excluding Canada) for the cars it builds and sells in the U.S. That includes materials it uses for its electric batteries, 40% of which comes from Chinese suppliers, per a recent analysis from Nikkei. “It is a debacle of epic proportions for the whole auto industry including Tesla,” Dan Ives, global head of technology research for Wedbush Securities, told Forbes via email. “Economic Armageddon.”
Scott Kennedy, a China expert at the Center for Strategic & International Studies, says that escalating U.S.-China tensions, and Musk’s seeming inability to influence the administration’s policies, could hamper Tesla’s efforts to receive approval from Chinese officials for its self-driving vehicles (which it began rolling out in February to some drivers) as well as the carmaker’s attempts to eliminate a ban on Teslas from entering military complexes and facilities. Musk’s association with the Trump administration and its policies will also further tarnish the brand’s appeal to Chinese buyers, who are already ditching Tesla for lower-cost domestic competitors like Xpeng and BYD, which eclipsed Tesla last year as the largest EV maker. “Whether it’s with Chinese officials or consumers, Tesla’s prospects in China have dimmed considerably,’ says Kennedy.
Musk is fully aware of the challenges. “Important to note that Tesla is NOT unscathed here,” he tweeted two weeks ago, referring to Trump’s auto tariffs, before Trump unveiled his even higher reciprocal tariffs regime. “The tariff impact on Tesla is still significant.”
Despite these costs, Tesla is better positioned than many of its U.S. rivals to cope with the tariffs, since its gigafactories in Austin and California produce all of the Tesla vehicles it sells to American consumers, unlike others which import at least some vehicles from Mexico and elsewhere. “From a sales standpoint in the U.S., it doesn’t hurt them as much on the cost standpoint as legacy automakers,” says Tu Le, head of consultancy Sino Auto Insights. “It isn’t great for Tesla, but I think it’s worse for many of the other automakers building in the United States.”
But even if Tesla fares better than its rivals in terms of prices, it still has to deal with the deterioration of its brand equity, which is likely to accelerate if Trump’s tariffs spark a recession, says Tinglong Dai, a supply chain professor at Johns Hopkins University who has studied Tesla. “I think its business will be even worse, not only because of the rising costs, but also because now you have this backlash that is deepening. People didn’t like him; now people are going to hate him even more.”
SpaceX (Value of Musk’s Stake: $147 billion)
The rocketmaker and operator of the satellite internet company Starlink is now the largest source of Elon Musk’s fortune. His estimated 42% stake in the business was worth $147 billion earlier this year, when SpaceX shares traded hands at a $350 billion valuation on the secondary market. It has received $3.6 billion in U.S. government contracts since 2009 and was just awarded $5.3 billion of rocket launch contracts through 2029, which are unlikely to be affected by Trump’s tariffs. But SpaceX relies on foreign suppliers for raw materials and parts that go into its products, as well as the goodwill of international partners for its Starlink business, which accounted for $8.2 billion of SpaceX’s $13.1 billion of revenue last year, according to estimates from Payload Space.
“The tariffs are introducing challenges across various facets of SpaceX’s operations, including supply chain costs, international contracts, and regulatory environments,” says Maxime Puteaux, principal advisor at space consultancy Novaspace. “Space companies are already under immense pressure from rising interest rates, persistent inflation, and post-COVID market trends. Tariffs will only worsen the blow and intensify the pressure.”
SpaceX’s Starlink relies heavily on Asian manufacturers. Taiwanese firm Wistron NeWeb Corporation began producing routers and other network gear for Starlink at a factory in Vietnam last year, while other suppliers – including Taiwanese manufacturers Universal Microwave Technology, Shenmao Technology, and Chin-Poon Industrial – have also begun moving some of their operations in Vietnam and Thailand, according to Reuters. (Vietnam and Thailand are among the hardest hit countries by Trump’s tariffs, with each facing 46% and 36% levies, respectively.) The tariffs on Vietnam, in particular, may disrupt SpaceX’s planned operations there: Vietnamese officials said last September that SpaceX was making a $1.5 billion investment in the country, though the purpose and progress of that investment is not clear.
Then there are the raw materials and rare earth metals that SpaceX, and so many other U.S. manufacturing companies, rely on.
“SpaceX has done a pretty good job of internalizing a lot of their development and manufacturing, but they still have a lot of suppliers that have exposure to countries affected by tariffs,” says James Gellert, executive chairman of supply chain analytics firm RapidRatings. “There are certain components or elements that are going into the construction of high tech products like SpaceX that don’t have a lot of alternative providers, and so that concentration risk is exacerbated when the costs go up exponentially.”
One of those elements is samarium, a silvery metal that is a critical component in magnets used in SpaceX’s rocket propulsion systems and in those of other U.S. aerospace and defense companies, says Tinglong Dai of Johns Hopkins. The U.S. “imports much of its [samarium] from China,” according to the Montana Bureau of Mines and Geology. On Friday, Chinese officials announced the country will require licenses for export of samarium and six other rare-earth elements; exporters of the minerals will need to apply for export licenses through China’s Ministry of Commerce. “A buyer can’t necessarily diversify away from a supplier or a location,” says Gellert. “And this is one of the problems with the current tariff thinking: The idea that buyers, the buying companies, can just shift their supply chain to be domestic, is naive.”
On top of supply chain issues, SpaceX has to worry about how foreign governments view Trump, and by extension Musk: Starlink satellite internet business is available in over 125 countries, but those countries don’t have to continue doing business with SpaceX. In Canada, for example, Ontario Premier Doug Ford said last month he is ripping up a $68 million contract with Starlink in response to Trump’s trade war. “It underscores the vulnerability of SpaceX’s international agreements amid escalating trade tensions,” says Novaspace’s Maxime Puteaux. “Political affiliations can influence regulatory approvals and partnerships internationally.
xAI (Value of Musk’s Stake: $42 billion)
Elon Musk’s artificial intelligence company recently merged with his social media site X in a $113 billion merger that valued the AI business at $80 billion. Founded in 2023, xAI has raised more than $12 billion from investors who helped finance the creation of a massive supercomputer cluster in Memphis with over 100,000 Nvidia GPUs. For phase two of its growth, xAI plans to build a second massive data center in Memphis on a 100-acre site that it purchased last month for $80 million. With Trump’s tariffs in place, that will be more costly than it would have been.
Data centers in the U.S. rely on parts – electric equipment, computers, computer parts – from abroad, especially from China, Taiwan, and Vietnam, all of which are hit hard by Trump’s tariffs, according to an analysis from Jason Miller, a professor of supply chain management at Michigan State University. “Long story short, these tariffs, especially this seeming spiral of escalation with China, will substantially raise the price of equipping data centers for operation,” he says.
Firms like xAI will also have to contend with the rising costs of the commodities, such as steel and aluminum, that go into the construction of the warehouses sheltering all the servers, Matt Mittelsteadt, a technology policy fellow at the Cato Institute, told Forbes for its recent story on how tariffs may cost the U.S. in the global AI race: “With regards to artificial intelligence, as any other sector, this is going to be a huge hit.”
