Why Trump’s Tariffs Are Disastrous For Elon Musk

Forbes

From Tesla to SpaceX to xAI, Elon Musk’s sprawling global business empire will be slammed by Trump’s tariffs regime. Here’s how.  Read the full story on Forbes: https://www.forbes.com/sites/johnhyatt/2025/04/08/trumps-tariffs-are-disastrous-for-elon-musk/  Subscribe to FORBES: https://www.youtube.com/user/Forbes?sub_confirmation=1  0:00 Introduction 1:44 The Tariff Feud What's The Latest With Tesla And Trump 6:32 Trump Tariff's Upset Elon Musk's Business Again 17:16 Trouble With X: Elon Musk Selling The Social Media Company To Himself 22:03 xAI's Quest To Become An AI Giant  Fuel your success with Forbes. Gain unlimited access to premium journalism, including breaking news, groundbreaking in-depth reported stories, daily digests and more. Plus, members get a front-row seat at members-only events with leading thinkers and doers, access to premium video that can help you get ahead, an ad-light experience, early access to select products including NFT drops and more:  https://account.forbes.com/membership/?utm_source=youtube&utm_medium=display&utm_campaign=growth_non-sub_paid_subscribe_ytdescript  Stay Connected Forbes newsletters: https://newsletters.editorial.forbes.com Forbes on Facebook: http://fb.com/forbes Forbes Video on Twitter: http://www.twitter.com/forbes Forbes Video on Instagram: http://instagram.com/forbes More From Forbes:  http://forbes.com  Forbes covers the intersection of entrepreneurship, wealth, technology, business and lifestyle with a focus on people and success.

Transcript

00:00Hi, everybody. I'm Brittany Lewis, a breaking news reporter here at Forbes. Joining me now

00:07is my Forbes colleague, staff writer John Hyatt. John, thanks so much for joining me.

00:12Good to be here, Brittany.

00:13Looking at the past three months of Trump round two, there are really two pillars that

00:18are defining President Trump's second term, tariffs and Elon Musk. And as we saw with tariffs,

00:24President Trump has threatened, started, paused and escalated trade wars with allies and adversaries

00:30alike. And as we see with Elon Musk, he is a senior Trump advisor. He has endorsed President Trump

00:37since July and has really been an ardent supporter. He's also the face of Doge. So I'm curious at the

00:44intersection of these two pillars here, Elon Musk and tariffs, what has Elon Musk said about tariffs

00:50so far? What has been his reaction? Yeah, so tariffs have been almost a breaking point between

00:56Musk and Trump until Liberation Day, just two weeks ago now. These two men have really been in lockstep.

01:06Musk has been supporting Trump and his administration's slew of executive orders and

01:13initiatives at every step, while Trump has been supporting Elon Musk's controversial Doge efforts.

01:21But with the Liberation Day tariffs and the ensuing market chaos, we have seen a sort of break between

01:28Trump and Musk, which has been sort of playing out on ex-Musk social media platform, as well as between

01:34an ongoing spat between Musk and one of Trump's critical trade advisors, Peter Navarro. And so it's been

01:41really interesting to play out. And there's a lot at stake for Musk. The tariff back and forth was

01:46really the first time we saw Elon Musk not publicly in lockstep with President Trump. And this really

01:52came to a head after President Trump's top White House trade advisor, Peter Navarro, made some comments

01:58about Elon Musk. He said this, Elon's not a car manufacturer. He's a car assembler in many cases.

02:05Elon Musk really took offense to that. He called Peter Navarro a moron and things that are worse,

02:10I'm not going to say here. Peter Navarro essentially denied that there was a feud. He said he's been

02:15called worse before. The White House spokesperson, Caroline Levitt, said boys will be boys. I mean,

02:21what do you make of this feud? They could say it's not a feud, but we all have eyes and we all know

02:26what a feud is. What I think is really quite interesting about this is that you kind of have

02:31two different elements of the Trump base here, the Trump constituency warring. And on the one hand,

02:39you have Peter Navarro, who's this sort of dyed in the wool protectionist trade hawk, somebody who has

02:47long pushed for restrictive trade measures and has been controversial in his positions on the economics

02:57of trading. A lot of mainstream economists would say that Peter Navarro is a fringe figure and that

03:02the theories he espouses on the benefits of the sort of protectionist world that he advocates for

03:08are not true. Whereas with Elon Musk, you have another wing of the sort of Trump backers,

03:16which is sort of the tech oligarchy, the billionaire wing. You have somebody in Musk who has made his

03:24fortune really on the back of free trade and on the back of the sort of neoliberal world order that has

03:31created so much prosperity for businessmen like him and for consumers at large. And so what you're

03:37seeing with these two is really sort of a clash of ideologies as much as the sort of petty back and

03:44forth that we're seeing. And they're really trying to lay claim to what is the true meaning of Trumpism?

03:51What like what really is this administration all about? And I think we'd have to say that as of right

03:57now, Peter Navarro is winning that fight. I mean, Trump is pushing forward with these 10 percent

04:03levies on all countries. He is ramping up the trade war with China, which is a crucial producer of

04:10materials and component of Elon Musk's business empire. So, you know, as of right now, you'd have

04:18to say that Musk is on the outside looking in when it comes to the Trump administration's trade policies.

04:25And that's not a place he's been in the past few months, really, on the outside looking in.

04:29As we know, we work at Forbes. Money does talk. And perhaps that's the reason why Elon Musk doesn't

04:35like these tariffs. Ever since Liberation Day, when President Trump unveiled the sweeping trade policy

04:41and the tariffs, stocks tumbled, global markets lost trillions. We saw at one point Donald Trump

04:47himself lost 500 million in his net worth. How has the tariff policy impacted Elon Musk's fortune?

04:54Well, it's hurt Tesla's stock price. We saw Tesla's stock price go down in the days after the

05:02Liberation Day announcements by I think it was upwards of 20 percent. And it wasn't alone. I mean,

05:09any large multinational company with exposure to the global economy, which is all of them,

05:16they all saw their stocks hit after Liberation Day. And what was interesting is that in those

05:20immediate few days, Musk wasn't saying anything. He continued on X as normal, you know, tweeting out

05:27criticisms of Chuck Schumer, retweeting fanboys of his talking about Starlink. That's SpaceX's

05:34satellite internet, internet satellite business. But a couple of days later, he started to make his voice

05:42heard. He was tweeting out a video of economist Milton Friedman extolling the benefits of free trade.

05:49He commenced his spat with Peter Navarro. He started to articulate his own sort of vision

05:56for what the Trump administration's trade policies should be. And he wasn't alone, of course. Other

06:02business figures, bankers like Jamie Dimon, were also voicing their concern about the direction in

06:09which Trump was taking the global economy and, of course, the U.S. economy. And so what we saw last

06:15week was, you know, Trump instituted this sort of 90-day pause on tariffs against all the other

06:21countries, excluding China, except for those 10% levies. And we did see a recovery in the stock price

06:29of Tesla, as well as other stocks. In my conversations with a lot of economists,

06:34a lot of strategists, they all say tariffs are a tax on the American consumer. I'm curious how tariffs

06:40are impacting Elon Musk's company specifically. So I do want to start with Tesla. In my conversation

06:46with Alan Owensman, who is one of our Forbes colleagues, he's reported things are bad at

06:50Tesla. They're about to get worse. And that's for a host of different reasons. Lackluster

06:55Cybertruck sales in Q1, other viable competitors. Elon Musk also has a branding problem. Another layer are

07:04the auto tariffs. And we know that Tesla isn't going to be hit as hard as other automakers because the

07:10cars are more American-made. But how specifically are the tariffs impacting Tesla?

07:15Well, one really interesting element of this is that Tesla is, of course, America's largest producer

07:20of EVs, electric vehicles. And EVs require certain types of rare earth minerals and magnets

07:29to power their engines, their electric engines. And those rare earth materials are almost exclusively

07:39mined and refined in China. And this presents a major obstacle for Tesla's business. If they cannot

07:51continue to import these magnets from Chinese refiners at reasonable prices, then that will

07:59absolutely crimp Tesla's margins, which could provide further downward pressure on the stock and

08:06expose the company to more negative investor sentiment. And what's really critical for Tesla is that it be

08:15able to continue to gain access to these critical rare earth materials. The long-term goal, which Elon Musk

08:22has advocated for on X in the last couple of hours, actually, is that the US needs to step up its

08:30refining capabilities of these rare earth minerals and production of these magnets so that domestic

08:38production can commence. But that's obviously not something you can do overnight. And so it presents an

08:46immediate near-term risk to Tesla's business. Beyond the increased cost of rare earth minerals,

08:56magnets, and even the accessibility to those metals is China's Tesla, or I'm sorry, Tesla's China business.

09:06People might not realize that China is actually the largest market that Tesla has. Tesla has a massive

09:14gigafactory in Shanghai, which produces Tesla's that it sells to Chinese consumers. And in recent years,

09:23Tesla has taken a hit from domestic competitors in China, EV makers like BYD, which is now the world's

09:30largest EV maker. And yet China is still Tesla's biggest, I'm sorry, China is still Tesla's biggest

09:39business. And so just the negative sentiment among Chinese consumers toward Elon Musk and towards this

09:47branding problem that you alluded to, because he's so closely intertwined with the Trump administration

09:55and global sentiment around the Trump administration, you have to think that that is also going to hurt

10:01Tesla's business there. Now, I want to move on because we know, as you're saying, that Tesla already had

10:07some problems, the tariffs aren't really doing anything to help that. Another company that Elon Musk really is

10:13the face of could have another branding problem is SpaceX. So how are the tariffs impacting that

10:19company? And what is that doing to Elon Musk's stake? Yeah. So SpaceX is a little different from Tesla

10:28in a critical regard in that it's privately held. So there's certain information about SpaceX that we

10:34don't have as outside observers. But similar to Tesla, I mean, this is a manufacturer of complex

10:43machinery and manufacturers of complex machinery rely on imports of different types of commodities and

10:52metals and parts from around the world. And so Trump's tariffs are inevitably going to affect the supply

11:00chain costs of a major global company like SpaceX. And specifically, you know, just as Tesla requires

11:09certain rare earth magnets for its EV engines, so do SpaceX rocket engines require rare earth magnets. One in

11:18particular that folks have told me about Samarium, which is on the list of rare earth minerals that China is now

11:25requiring licenses for to continue exporting. This is a critical element for creating propulsion systems or engines for

11:33SpaceX rockets. So it may not pose an immediate near term threat to SpaceX's, you know, business to, you know,

11:42its launch rocket business. But I mean, in order for it to continue to manufacture rockets, I mean, it needs access

11:49to these sorts of minerals. And then, you know, more broadly speaking, you know, a critical part of SpaceX's

11:55business is its satellite internet provider, Starlink. And so Starlink accounts for about two thirds of

12:01SpaceX's revenue. This is a company that has launched thousands of satellites into the sky that provide

12:07broadband internet access. And it's become a major player in the satellite internet business, probably the

12:16major player globally. But similar to Tesla, you know, if Starlink and SpaceX are so closely associated with

12:24the brand and image of their controlling shareholder, Elon Musk, that it faces reputational risks.

12:32And we've already seen the province of Ontario, Canada canceled a about $70 million contract it had

12:39with Starlink because of the escalating tit for tat tariffs between the US and Canada. We saw Italian

12:47officials table talks of a $1.5 billion deal for Starlink to oversee defense communication systems

12:58because of increasing backlash to Musk and the Trump administration. And so, you know, for Starlink to

13:04continue to grow its business, you know, it's seeking those contracts with international entities. And

13:11in a Trump 2.0 world where the US is so combative and where alliances are fracturing and in which

13:20Musk is so closely associated with the fracturing of that order, it does pose a risk for

13:27Starlink because how will it sign up new international clients if those clients view the US, view Trump and

13:34view Musk unfavorably?

13:35John, as we sit here right now, President Trump has largely paused the reciprocal tariffs,

13:41but there's still a baseline tariff. There is still that ratcheted up tariff on China,

13:45that tit for tat. And tariffs are the highest we've ever seen since pre Great Depression levels.

13:51Have we seen Elon Musk's net worth bounce back at all from this pause? What does that look like right now?

13:57Right now he's at about three hundred and seventy billion dollars. So he's still comfortably the

14:03world's richest person. You know, Tesla stock price has been interesting because if you look at it

14:09year to date, it is down about 30 percent. So it has taken a major hit over the last three months.

14:18However, if you compare it to a year ago, Tesla stock price is still up. If you compare it to just

14:24after Liberation Day, it's up from then, too. And so, you know, we have to kind of bear in mind that,

14:31you know, Tesla's valuation was already extraordinary and some would argue inflated

14:36before President before Trump won reelection. And, you know, following Trump's election,

14:42Tesla stock soared 90 percent. It was there was an exuberance that was probably irrational. And so

14:49even though we've seen a climb down in Tesla stock, which is one of the key sources of Elon Musk's

14:54fortune, you know, it's still extraordinarily high for an automaker of its size.

15:01In the case of SpaceX, you know, SpaceX is privately held, but we do see on secondary markets that the

15:08share price has dipped a little bit over recent weeks, but it still is holding fairly steady around

15:15the 350 billion dollar valuation mark. So, you know, SpaceX is still a solid source of Elon Musk's

15:22fortune and it's actually now the largest source of his fortune. But one thing that has offset the

15:28decline in Tesla share price since January is the comeback in X, formerly Twitter. And so following

15:37Trump's election in November, we've seen quite the extraordinary comeback for X.

15:43And I really want to talk about that because Elon Musk, despite what we're seeing at Tesla and

15:48SpaceX, he's still comfortably the richest person in the world, according to Forbes. And there is a

15:53glimmer of good news to his bottom line. You're reporting on this merger between XAI, Elon Musk's

16:00AI startup company and X. So talk to us about the deal. Yeah. So this is a really unprecedented deal

16:08in some ways. And it really got lost in the news of tariffs and the general craziness of the Trump

16:13administration. But at the beginning of April, Musk announced on X, naturally, that he had completed

16:20a merger between X. So the social media company we all know is Twitter and XAI, the startup, the AI

16:27startup, the open AI competitor that he just launched a few years earlier. And so in this merger,

16:33it was $113 billion merger net of debt. And so that deal values XAI, the AI startup, at $80 billion,

16:43which is $30 billion higher than the valuation at which it last raised outside funding. So that's

16:49an extraordinary $30 billion increase from just a couple months ago when it last raised in November.

16:57And then X. And so with X, the new valuation is $45 billion. That's inclusive of debt. So

17:06$12 billion in debt takes it down to $33 billion. But that's just a hair more than the valuation at

17:13which Elon Musk took it private in 2022. And the reason I say this is such a great comeback for X is

17:19because just as recently as end of last year, investors in X, companies like Fidelity, were

17:28marking their equity valuation at around the $10 billion mark. So an extraordinary 70% plus haircut

17:37that they had assigned the value of X. This was with good reason. It's because following Elon Musk's

17:44takeover, he completely remade the site in his own image. So he started telling advertisers to go F

17:53themselves, as we all remember. He fired 75% of the staff. He took away a lot of the guardrails and

18:03content moderation features that have been built up over years. And so we saw that big exodus of blue

18:12chip, big advertisers, and that really hit X's revenue. So financials reported in the Wall Street

18:20Journal and elsewhere show that last year, X's revenue was about $2.5, $2.7 billion down from over

18:30$5 billion in 2021, the last year before Musk's takeover. However, adjusted earnings before

18:38interest taxes and other expenses, EBITDA had bumped up a lot. So previously in 2021, EBITDA had been

18:48about $680 million. Under Musk's control last year, EBITDA was $1.25 billion. And so this is typical

18:59Musk, right? He comes in, he slashes expenses, he lays off a ton of people, he breaks things,

19:05and then he fixes them to see what's actually necessary. And so an investor in X I spoke to

19:13said, obviously this is worth $44 billion, the valuation at which he took it private. I mean,

19:18this is a company doing $1.25 billion in EBITDA, which no doubt is an improvement, but we have to

19:25remember that it has that huge $12 billion debt load still from the take private. And what the merger has

19:33solidified really between X and XAI is that, you know, XAI and X are naturally sort of symbiotic

19:44because, you know, X is a place where people go, it commands our attention. It's a social media feed

19:51where we all spend our time, or at least journalists and those who, you know, miss Twitter.

19:57But Grok, the chat bot, you know, that's powered by XAI. And so, you know, Grok is available on X. So

20:08it kind of makes sense that they come under the same roof and they find those synergies. Critics,

20:13though, would say that, you know, Elon Musk is the controlling shareholder of both of these

20:17multi-billion dollar companies. And he's just pushing this deal through to inflate the valuations

20:25of both companies. And he doesn't have any guardrails preventing him from doing so. You know,

20:29there are not independent boards of directors at these companies who are going to, you know,

20:34evaluate whether or not this deal is really at evaluations that are appropriate and or, you know,

20:42whether minority shareholders want the deal to go through. That being said, the minority shareholders

20:47definitely do want the deal to go through. These are firms like Andreessen Horowitz, Sequoia Capital,

20:51ABC. These are all Musk stands and anything that Musk says they're they're good with. And he's made

20:58them all a lot of money in the past. So there's no reason to think he won't this time either.

21:02What you said about Elon Musk and what he did to Twitter now X is really the blueprint of what

21:06he's doing with Doge, cutting people, cutting everything, maybe over cutting and then seeing

21:13what's left and then growing it from there. And the last thing you really want to hear as an investor

21:18is someone who just bought a company telling advertisers to go F themselves. So investors,

21:23as you're saying, are very happy for this X comeback. Some are too critical that this is

21:27too much of a sweetheart deal for Elon Musk. But just how much of a sweetheart deal is it?

21:33How much did this boost his bottom line? The value of Musk's stake in X and XAI was boosted by our

21:41measurements by around $33 billion. And bear in mind, we had last estimated his stakes in those

21:49companies in late February, early March when we were finalizing our world billionaires list.

21:56And so, you know, this was an extraordinary on paper gain for Musk of $33 billion.

22:03Elon Musk has been vocal about really wanting to be a pioneer in the AI space.

22:08Our colleague Alan Owensman said this about Elon. He said he claims the car maker will someday be

22:13the most valuable AI company in the world, meaning Tesla. But Tesla is not the AI powerhouse that Elon

22:20Musk says it is. Is Elon Musk hoping XAI is going to be his AI crown jewel?

22:25I think that's fair to say. I mean, this company has received over $12 billion from outside investors.

22:34It's building one of the world's largest cluster of supercomputers outside of Memphis, Tennessee.

22:42And so he's putting a lot of chips in this basket. And let's not forget that, you know,

22:48Musk's original AI crown jewel was OpenAI, the firm that we all know. He co-founded that with Sam Altman.

22:56And ultimately, there was a rift for between those two men over the direction of the company.

23:03And so XAI is in some ways Elon Musk's rebuttal to OpenAI. And, you know, with the gravitas of Musk

23:12and with the backing of his institutional investors like Andreessen Horowitz, he is turning it into a

23:19Goliath in its own right. We're seeing a lot from Elon Musk right now with this merger, with his rebuttal

23:26to President Trump's tariffs, with Tesla tumbling. I mean, what specifically, when you're looking at

23:33Elon Musk as a whole, what are you specifically looking out for next? I'm really curious to see

23:39the extent to which he recedes from the political spotlight when his 130 day stint as a special

23:47government employee ends. Is he actually going to leave Washington? Is he actually going to step back

23:53from his sort of de facto role right now as Trump's right hand man? Is he still going to be trying to

24:00influence the policy, not just of Doge, but of the administration as a whole? And more equally

24:08important, will Trump still view him as favorably as he has? There have been reports that Trump is

24:15kind of tiring of Musk, that he's ready for his Doge tenure to end and that he wants to get on with

24:21governing as without this sort of heavy weight of Musk always around him. So it'll be really interesting

24:29to see the extent to which these two men continue to influence each other. And it will be interesting

24:35as that 130 days comes to an end. If he does leave on his own, if this reported rift comes into the

24:41actual spotlight, opposed to just reported rift, and then there's a ton to look out for. John Hyatt,

24:48I appreciate our conversations. I appreciate your reporting. I'm looking forward to the next one.

24:51Thanks, Brittany. Great to see you, as always.

25:02you

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