Will Trump “Consequences” Break Tesla?

President Donald Trump says Elon Musk will face “very serious consequences” if he provides financial backing to Democrats who challenge Republicans who support the One Big Beautiful Bill Act (OBBB). The bill includes the President’s national budget and other government policies that he has created and supported.

A plan to back Democrats would likely mean Musk would fund their campaigns in elections that pit them against Republicans in House and Senate races next year. Musk supported Republicans in the same way in the 2024 election.

What Tesla (NASDAQ: TSLA) investors should fear is that Trump will attack America’s largest EV company. Trump might also financially damage SpaceX, the huge rocket company that has billions of dollars in federal government contracts.

Tesla has several connections to the federal government, which some Trump officials might target. Among the primary ones is almost certainly dropping the $7,500 tax break for people who buy most electric vehicles (EVs). That move was certainly months ago and is likely priced into Tesla’s shares today.

Tesla may be affected by China tariffs that add 25% to goods imported from China. Those tariffs are currently on hold, but if they take effect, they will impact parts and batteries that Tesla needs in the U.S. to manufacture its vehicles. As is true with other car companies, Tesla would need to accept lower margins or pass the costs on to customers. It is too early to tell if the potential higher prices would affect demand for Teslas. Tesla might have to raise prices by hundreds or thousands of dollars to protect its operating income.

Rules for full self-driving cars are set by cities and states today. There has always been a chance that this would be moved to the federal government level. It is the only way to have standard rules across the entire country. Tesla’s self-driving technology differs from that of competitors, such as Alphabet’s (NASDAQ: GOOG) Waymo. Rules unfavorable to Tesla’s products could allow its competition to advance plans to install them widely in cars.

The SEC has investigated Musk before. For example, Musk tweeted in 2018 that Tesla would go private at a share price much higher than it was at that point. The SEC called the tweet “false and misleading.” In May 2024, according to Reuters, “Tesla’s Autopilot and Full Self-Driving systems assist with steering, braking and lane changes – but are not fully autonomous. While Tesla has warned drivers to stay ready to take over driving, the Justice Department is examining other statements by Tesla and Chief Executive Elon Musk suggesting its cars can drive themselves.”

There is also a theory that the government could probe Musk’s drug use, which many media outlets have described.

Tesla has often been described as a risky investment. That risk has grown.

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