Donald Trump and Elon Musk’s Relationship Could Break Over China

Elon Musk’s ties with China could harm his relationship with Donald Trump and therefore his position in the Cabinet, experts have told Newsweek.

The CEO of Tesla and SpaceX has been nominated to lead the newly created Department of Government Efficiency alongside former Republican presidential candidate and entrepreneur Vivek Ramaswamy.

“These two wonderful Americans will pave the way for my Administration to dismantle Government Bureaucracy, slash excess regulations, cut wasteful expenditures, and restructure Federal Agencies,” stated the announcement from Trump.

It comes after Musk, who is the world’s richest man, spent tens of millions of dollars to help Trump get elected and was one of his most vocal supporters throughout the campaign.

But there is one thing experts say could cause a rift between Musk and Trump: China.

“Trump and Musk could fall out because Musk ends up opposing tough economic policies on China,” Neil Thomas, fellow at the Asia Society Policy Institute told Newsweek.

Newsweek has contacted Musk and Trump’s transition team via email for comment.

The president-elect has nominated prominent China hawks Marco Rubio and Mike Waltz to be secretary of state and national security adviser respectively in a signal of his hostile approach to the country. He has also threatened to slap 60 per cent tariffs on all Chinese exports to the United States, and to sanction Chinese electric cars being built in Mexico to sidestep tariffs, as well as eliminate more of Beijing’s remaining trade privileges, possibly igniting a trade war with the country.

“Tariffs are the greatest thing ever invented,” Trump said in September in Flint, Michigan. He also claimed imposing tariffs is necessary due to the $800 billion trade deficit the U.S. has with China.

“We have, right now, an $800 billion trade deficit with the world. So think of that. So let’s say we have 500 to 375, but let’s say we have 500 with China, but we have 800 total with the world. That would mean that China is more than half. So we’re going to get it taken care of. And, frankly, it’s going to make us a much stronger, much richer nation,” he said in a speech in 2018.

In contrast, Musk—whose company Tesla has “gigafactory” in Shanghai, building cars for the Chinese domestic market as well as Australasia—has been careful not to criticize the Chinese Communist Party.

“China rocks,” he said on the Automotive News’ Daily Drive podcast in 2020. He also congratulated the CCP on its 100th anniversary and was even once offered permanent residency in China.

Meanwhile, when China told Tesla to make a change to their cars in 2021, and recalled more than 285,000 vehicles over safety fears, Musk complied immediately. Musk has also complied with recalls of Tesla vehicles in the U.S.

And when China shut down a Tesla factory in 2022 for four days in order to comply with a citywide stay-at-home order from the Chinese government amid a surge in coronavirus cases, Musk quietly complied, despite reticence in similar situations in the U.S. For example, when California shut down a Tesla factory during the outbreak of the coronavirus in spring 2020, Musk claimed that state health authorities were being “fascist”

By 2022, China accounted for about 22.5 percent of Tesla’s total revenue, with China on its way to becoming the world’s largest market for electric vehicles.

Musk has also expressed concerns about rising tensions between the U.S. and China in the past. “I think that should be a concern for everyone,” replied Musk when asked if he was concerned about “the growing belligerence” between the U.S. and China during an interview with CNBC.

Earlier this year, he criticized the Biden administration for raising tariffs on Chinese electric vehicles to 100 percent. “Neither Tesla nor I asked for these tariffs,” the multibillionaire told a technology conference in Paris. “Things that inhibit freedom of exchange or distort the market are not good,” he added.”Tesla competes quite well in the market in China with no tariffs and no deferential support. I’m in favor of no tariffs.”

Laura Smith, presidential historian at Oxford University, added that Musk’s appointment may be a sign of Trump’s “lack of decisive policy” on China, which could lead the two to fall out.

“Looking back at the first Trump administration, it was notable how many staff members he fell out with over personal loyalty rather than substantive policy issues. Arguably this is a reflection of, at the time, Trump’s lack of political experience that made him less committed to definitive policies.

“It remains true that Trump is no policy wonk, but he may have more disagreements during his second term based on policy with his increased exposure to different issues. The fact that he has chosen people with diverse views on China to serve may indicate his current lack of decisive policy,” she told Newsweek.

But while there is potential for a rift between the Tesla CEO and the president-elect, both Smith and Thomas agreed that Musk may very well end up shaping Trump’s China policies, helping his relations with the country.

“Now that Trump and Musk appear so close, it would seem that Trump would want to keep him on side considering the wealth of resources Musk has to denigrate an opponent,” Smith said.

Thomas added that Trump is ultimately “a business owner who respects Musk’s success,” and therefore, “their close relationship could lead the incoming president to become more targeted in his China policy and fall out with the security hawks on his foreign policy team.”

Other experts have argued that Musk could be the new Kissinger in China, helping broker a deal between Washington and Beijing. U.S. diplomat Henry Kissinger, who died in 2023, is credited with normalizing U.S.-China relations following his landmark visit to Beijing in July 1971. Highly respected in China, he continued to engage with its leaders as an unofficial envoy, most recently meeting with President Xi Jinping in July 2023, just months before his death.

“There has been widespread curiosity in China the past few months about whether Musk could be the new Kissinger, helping broker a deal between Washington and Beijing,” Scott Kennedy, senior adviser and Trustee Chair in Chinese Business & Economics at the Center for Strategic and International Studies, told CNBC News this week.

“Whether this is an ingenious insight that will help keep relations from imploding or part of an unrealistic soothing scenario Chinese want to tell themselves is hard to know at this point,” he added.

In April, Musk met Chinese Premier Li Qiang, who cited Tesla as an example of successful trade cooperation between Beijing and Washington, according to state media.

Wang Yiwei, director of the institute of international relations at Renmin University, told CNBC that Musk’s position among the Chinese could see him persuade Trump to cancel the strict tariff hikes he has threatened, as well as enable a deal for Chinese companies to build factories in the U.S.

But Dewardric McNeal, Longview Global managing director and senior policy analyst, was not so optimistic.

He told CNBC that while Musk might open some doors, none that couldn’t also be opened through steadfast diplomacy. He cautioned that relying on someone whose main loyalty lies with his own ventures could be a mistake. “Musk’s unpredictability and strong, often controversial views don’t always align with the diplomatic or strategic interests of either country,” he said.