I spoke almost a year ago to Mark Spiegel of Stanphyl Capital in New York. He said it was just a matter of time before Musk and Trump fell out – the only question was who would shaft who first but his view was that sooner or later everyone ‘gets Musked’.

An ugly, name-calling, chest-thumping public brawl on Twitter between the richest guy in the world and the most powerful guy in the world – it's what the platform was made for. It’s also whacked Tesla stock as bulls need to reassess their upside case for the carmaker. Both probably realise that this is doing each of them a lot of harm – Musk could lose billions of dollars in government contracts and tax credits, while Trump could see his “big beautiful bill” fail to pass.

Apparently, they are going to cool off a bit and talk things over. But in the words of Anchorman, boy that escalated quickly! Selling in Tesla was HEAVY with $153bn wiped out in one day. There is a whole cluster of related items here - we saw the likes of Palantir also hit hard, down almost 8%. Broadcom fell 4% after-hours despite solid results. Tesla though is coming back in pre-market trade.

Musk has been criticising the tax and spending bill all week, which prompted Trump to talk about his disappointment with his ‘former’ ally.Musk then went full tweetstorm and launched a series of attacks on X, suggesting Trump appears in unreleased files related to Jeffrey Epstein Trump shot back saying Musk "went CRAZY" and was asked to leave the administration, while he also threatened to cut government contracts with Musk's companies. Tesla's stock price dropped a significant 14%, lowering Musk's EV giant below the $1 trillion threshold.

Clearly there are new risks for TSLA – the argument that Musk’s closeness to Trump was bullish for the stock because for instance it would mean an easier path for the rollout of robotaxis or some other favourable policy decision is clearly now very much in doubt. No friendship with Trump changes the regulatory environment. But, I guess, TACO...?

Anyway, look at it like this – the tax bill will cut Tesla’s EV subsidy, probably negatively impact profits by $1.2bn a year...plus there is $2bn hit coming from California legislation...which explains why Musk is such a critic. The tax bill has much broader ramifications than EV credits and Tesla shares though – so the question is whether this intervention is going to derail the legislation. If it does then it’s probably GOOD for Tesla. But then Trump has many other levers of vindictiveness to pull – he's already mentioned pulling government contracts for things like SpaceX or Starlink. And then you have to chuck in elements like drones...which MS’s Adam Jonas says could turn TSLA into a defence stock...the bulls will keep grasping and throwing new reasons to buy. And what about the wider macro implications if the tax bill fails? Is it really the last chance to control government spending? What would failure do to the tariff agenda?

Let’s not forget trade! Before this Trump-Musk spat S&P 500 e-mini futures touched 6,016, the highest since late Feb as reports that Trump had held a phone call with China’s Xi Jinping. Trump said he has had a "very good" phone call amid their ongoing trade war, during which they agreed to more tariff talks.