Trump-Musk Public Meltdown, China-US Trade Talks, Tariffs Unravel Tweed
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Bloomberg Audio Studios. Podcasts. Radio. News. This is the Bloomberg Daybreak Europe podcast available every morning on Apple, Spotify or wherever you listen. It's Friday the 6th of June in London. I'm Caroline Hepker. And I'm Stephen Carroll. Coming up today, Elon Musk and Donald Trump trade insults and threats in an extraordinary and very public war of words.

More than $150 billion is wiped off Tesla's market value as investors fear retaliation. Plus, unravelling global trade. How the Scottish tweed industry shows the collateral damage that tariffs are causing around the world. Let's start with a roundup of our top stories.

I'm very disappointed in Elon. I've helped Elon a lot. Elon and I had a great relationship.

I don't know if we will anymore. I was surprised because you were here. Everybody in this room practically was here as we had a wonderful send off. He said wonderful things about me. You couldn't have nicer said the best thing. He's worn the hat. Trump was right about everything. And I am right about the great, big, beautiful bill. By mid-afternoon, Musk was posting on his X platform that Trump would never have won back the White House without his help.

Then, as simmering tensions boiled over, the president called the billionaire crazy and threatened to cancel his company's federal contracts. Musk shot back, pledging to decommission the Dragon spacecraft that underpins flights to the International Space Station.

Now, the acrimonious back and forth between Musk and Trump represents a remarkable falling out between two men who spent months working together to reshape the US federal government. This after the Tesla CEO poured hundreds of millions of dollars into the president's election campaign. However, their

are some signs of relaxation or conciliation of sorts. Elon Musk yesterday evening signalled on social media that he was open to cooling tensions with Trump. And Politico is now reporting that White House aides have scheduled a

call with Musk in an effort to avoid further escalation. That bickering wiped $34 billion from Elon Musk's personal net worth in one day. Tesla shares fell by 14% yesterday, wiping roughly $152 billion off the value of the company. Ross Gerber, president and CEO of Gerber Kowalski, one of Tesla's earliest investors, explains why he was one of those selling shares in Musk's car company.

This is a disaster for Musk. I don't know if I can spin it in a positive way because it's just so beyond any intelligent businessman's behavior would be. I can't imagine after putting Trump in there that he would then turn Trump into an enemy of all things because he's still the president of the United States.

Gerberado that he expected SpaceX, one of Musk's private ventures, had its valuation cut in half. The massive sell-off marks the second largest loss ever made by one person, the largest also being Elon Musk in 2021. Musk is still the world's richest person with a vast $334.5 billion fortune and has endured any number of routes before.

Well, the fight played out on social media came as President Trump and Chinese President Xi Jinping agreed to further trade talks on a phone call. Trump acknowledged the relationship had gotten, quote, a little off track on that call and said that it was an honour to have Chinese students. White House Press Secretary Caroline Leavitt told Fox News the conversation focused on trade and rare earth minerals.

This was a good, productive call. And he has always enjoyed a respectful relationship with China's president. And China needs the United States of America in our markets. And we also have a strategic interest in China's economy and market as well. And so that's why both leaders decided today that their trade officials will continue to meet to discuss this important bilateral relationship.

White House Press Secretary Caroline Leavitt there speaking to Fox News. China's foreign ministry says that the call was initiated at President Trump's request. It comes just a day after the U.S. president lamented again on social media that his counterpart was extremely hard to make a deal with.

Germany's Chancellor Friedrich Merz successfully navigated a 40-minute meeting with Donald Trump in the Oval Office. The two diverged on the issue of how to end the war in Ukraine, with Merz saying the West should look to stop it very soon. I told the president before we came in that he is the key person in the world who can really change

do that now by putting pressure on Russia and we will have this debate later on again how we can proceed jointly between the Europeans and the Americans and I think we are all in we are having the duty to do something on that now to stop it after three and a half years.

Germany's Chancellor Friedrich Merz risked the trip to Washington despite other world leaders facing public humiliations in the Oval Office. The US President, meanwhile, compared the war in Ukraine to a fight between two children, saying, "...sometimes you let them fight for a while before they can be pulled apart."

Now, from that to the ECB, President Christine Lagarde has unveiled an upbeat outlook for the eurozone. Speaking after the European Central Bank cut interest rates again down to 2% on Thursday, Lagarde offered an optimistic assessment of the bloc's growth prospects. Higher tariffs and a stronger euro are expected to make it harder for firms to export. High uncertainty is expected to weigh on investment. But at the same time,

Several factors are keeping the economy resilient and should support growth over the medium term. Christine Lagarde added that she believes the central bank's policy is in a good position to navigate the uncertain conditions, in her words, that are likely to come from global trade and a jump in spending in Europe. The ECB described inflation as currently around its 2% target.

Zaya Youssef has resigned as chairman of Reform UK, saying he no longer believed working to get the party elected was a good use of his time. His departure comes a day after he criticised the party's newest MP for asking if the Prime Minister planned to ban burqas. Reforms leader Nigel Farage told GB News Youssef was very talented and his resignation marks a loss for public life.

He's brilliant when it comes to data. He's brilliant when it comes to the technical side of things. He really is in a class of his own. And frankly, I'm sad that he's going. I'm sad for the party because he leaves a gap. I'm sad for him, actually.

Nigel Farage speaking there in the latest high-profile exit for reform, which currently tops opinion polls in Britain. Former reform MP Rupert Lowe was ousted in March over allegations that he made verbal threats against Youssef.

And those are a few of our top stories then for you this morning. So in terms of the markets then, the Nasdaq yesterday closed down by 1%. Tesla's share price dropped 14.3% on the feud between Musk and Trump. S&P 500, E-mini futures and Nasdaq futures this morning are pointing high. European stock futures though are lower. European stocks though yesterday were actually mostly driven by the ECB and Christine Lagarde saying that basically the bank may be nearing the

end of the rate cutting cycle basically closing up before the real spat took off in the US Asian stocks this morning have been fluctuating we've got another major data point to think about today the US jobs report non-farm payrolls expected to see 126,000 jobs um

added in the U.S. This as Japan's long yields continuing to ease. WTI crude futures pretty quiet this morning, $63.17. The Dow and gold is up by seven-tenths of one percent. Also, the dollar little change. So, those are the markets. In a moment, more on the social media blow-up between Elon Musk and Donald Trump and the U.S. President's conversations with the leaders of China and Germany.

But in case your blood pressure wasn't high enough scrolling social media in the last 24 hours, our finance reporter Laura Noonan's been writing about another high pressure event in Frankfurt. It's the JP Morgan Corporate Challenge, which she says is arguably the biggest social mixer in finance. 50,000 people taking part in a three and a half mile run challenge.

through the German financial capital. Now, Laura, who's a keen runner herself, actually writes that this could be dismissed as a low-stress amble. Lots of people actually walk or jog the course, but the global financial community sees it as a blood sport, in her words. Some banks rumoured to hire athletes to improve their chances. Now, she points to one example. She names one, yeah. The Italian Olympic triathlete hired by JP Morgan in February. Now, his bosses insist he was not hired for this reason, but he did finish fifth.

in the race. It's an event actually that dates back to 1977 to a run in Central Park in New York, which is why it's three and a half miles, which is a bit of an odd distance for it as well. Even I might be able to manage that. But having to be amazingly good at your job and also...

Also, some other field may be running or music or whatever it might be that you can do. I think it's just amazing because you have to have that second string to your boat. I mean, you're a runner. Yeah, but I don't think I'd fancy this. 50,000 people. No, thanks. Anyway, there's some great stories in there. You can read Laura's full report in the Business Week daily newsletter. You can sign up for it at bloomberg.com slash newsletters.

Well, let's get into the very public escalation of the row between the President of the United States and the world's richest man as Donald Trump and Elon Musk traded blows and threats on social media. Our senior US government editor, Derek Wolbach, joins us now for more. Good morning, Derek. Bring us up to speed. What has happened between Elon Musk and Donald Trump? Well,

Well, there was a major explosion in their relationship. I don't know any real other way to put it, which denigrated all the way down to accusations of familiarity with Jeffrey Epstein and all sorts of other things. It got very personal very quickly. Trump, meanwhile, smashing back that

that maybe the best way to cut the deficit would be to end all of the contracts with Elon Musk's many companies. This has gone in 11 months from Musk endorsing Trump to Musk putting in nearly $300 million of his own money to elect Trump and Republicans up and down the ballot.

winning universal control of Washington, then becoming the face of Trump's efforts to slash the federal bureaucracy, both men scything through the federal government together, and then

just sort of ending not necessarily in a way that either probably would have wanted, but certainly in a way that imperils both of their big flagship projects right now. Certainly, Musk, you mentioned the damage to Tesla shares and

thus Musk's net wealth. At the same time, Musk is the principal opponent of, on the right anyway, of Trump's big, beautiful bill, which is the centerpiece of his legislative agenda. So there's a lot at stake for both of those. And indeed, we have seen, I'm sitting in Singapore in my day so far, some efforts to try and, I guess, contain this blast, find ways to de-escalate, find some off-ramps,

For both of these guys so that they can kind of limit the damage and keep going on there um

Musk did pull back a little bit from his threat to cancel the Dragon shuttle program that NASA uses to ferry astronauts to and from the space station. He did pull back from that threat to cancel there. We're waiting to hear from the president there. And we've seen a report that White House aides are trying to schedule a call with Musk for

So lots to play here. Lots may still happen, but a pretty remarkable explosion in American politics yesterday. Yeah, it certainly was. And it looks like it's not over by those latest reports. More ensuing perhaps later on in the coming hours. You talked a bit about the effect on the businesses as well. We saw that big move in share prices too yesterday.

But from a political point of view, the budget debate still continuing in Washington. Is the tax and spending bill in danger, in more danger than it was yesterday?

Well, it's certainly not in better shape than it was yesterday. What I would say is that the math on that remains the same. Senate lawmakers, several of them, want to cut a lot more than they're cutting right now in the bill. Musk had mentioned that...

that the deficit impacts of this legislation, about a $2.4 trillion increase in U.S. deficits over 10 years it's projected to be, would more than dwarf all of the most optimistic readings of the savings that Doge had been able to do at, as Musk said, great personal cost to him.

So there had been some spending hawks on the right who were saying, look, we want to have this score better. It needs to not increase the deficit so much or even at all. At the same time, House Republicans are very cognizant of the fact that

that they barely passed this legislation in the first place, right? House Speaker Mike Johnson compared his party whip strategy to tightroping across the Grand Canyon on a piece of dental floss. He doesn't have much margin, and there are people in his conference who do not want to cut any more, as well as others in his conference who want to cut a lot more. And you've got to find a balance point there. So

Elon Musk standing on the side, firebombing this on social media is not very helpful, especially when he's speaking into the lead that Democrats have said, which is that this thing is going to explode the deficit. So if you care about debt, if you care about deficits, as a lot of Republicans...

and the bond market seem to, then this bill is a problem. All of that is bad for Trump, and all of that is why a lot of aides to both of these guys are trying to find ways that they can kind of back up from the ledge, take the temperature down a little bit, and have these two very proud billionaires find a way to get back along again.

Derek, thank you so much for being with us this morning. Our senior US government editor, Derek Warbank. I mean, I'll add to that our chief economist for Bloomberg Economics, Tom Orlick, saying the fight underscores the potential vulnerabilities that follow from concentrating industrial and government power in one person, i.e. Elon Musk. So, yeah, lots could potentially come from this.

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while also creating opportunities to give back along the way. Visit Thrivent.com to learn more. Thrivent, where money means more. While those exchanges were playing out with Elon Musk yesterday, Donald Trump was also holding high-level diplomatic conversations. He spoke to Chinese President Xi Jinping for the first time since his inauguration and met Germany's Chancellor Friedrich Merz in the Oval Office as well. Our EMEA News Director Rosalind Matheson is with us for more. So, Ros, Trump finally speaking to Xi Jinping. Did it

Did it produce any turning point in those relations that have become fraught yet again? Well, yeah, because yet again, it seems the thing that has broken the ice with the US and China is a direct conversation between Donald Trump and Xi Jinping, which was a hallmark also of Donald Trump's

first term as president is those two get on the phone or they meet for dinner in somewhere around the world and manage to get at least a temporary truce. Often it didn't last, but at least it did cool things for a bit. And as we saw with this phone call yesterday, they've agreed to have further trade talks. They're going to have high level representatives from either side meet and talk about trade. They seem to have put a little bit of a stopper on the tensions

over rare earth minerals, which was really the key thing from the US perspective. And it sounds like they've at least

created a pathway for further talks, which is the biggest thing of all, is to have those conversations going and to get into some of the detail in these further conversations. So you can see from the market reaction, there was certainly a sense that this has been a little bit of a breakthrough between the two countries. Again, very complex issues, though, to deal with on the trade side, but also on the security side, on the tech

side. And there's a lot of issues there. So will this last? It's very hard to know. But the fact that they've created a pathway for talks is quite significant. So we bounce from then China and the US to the US and Germany in what was such an enormously busy day, wasn't it, in terms of the White House. Friedrich Merz, for his part, does seem to have gotten off lightly with his encounter with President Trump. It didn't

to produce any progress on efforts to end the war in Ukraine, though. Yes, it didn't. Although for Merz, it was probably just a matter of trying to survive that meeting, given that other leaders have really fallen afoul of those moments.

in the White House, and that was perhaps the tactic, was to let Donald Trump do most of the talking, to praise him and not to say too much and not to draw his eye in any way. But as you said, they did disagree a little bit on Ukraine. Donald Trump really talking about Ukraine in a way like a sporting match, that he thinks that the two sides might need to fight it out for a little while longer,

sort of alluding to a hockey game where, you know, Friedrich Moos came in and said, well, very clearly this is Vladimir Putin who started this war. But they didn't really talk about next steps. They didn't talk about where the conversations might be going between Russia and Ukraine towards a ceasefire. They didn't talk about where the US would stand in all of that. I mean, Donald Trump has really been in a way washing his hands of it to some extent and saying that he thinks that Russia and Ukraine need to sort it out

So there was no real progress on that front, but neither was there any blow up. And that was probably to some extent a result for Friedrich Mors. But on the trade front, actually, the signals seemed relatively positive compared to what Donald Trump has indicated towards trade with the EU in the past.

Well, that's right. And in fact, there were some fairly warm words from Donald Trump on the trade side with Europe and with Germany. And that comes as the mood music has been improving a little bit in general. We've seen the rhetoric from both European officials and the US in recent days talking about things going in a better direction, talking about momentum in a way, despite the fact that we've got these new US levies on steel and aluminum, which obviously have not resonated particularly well with

with the EU. So there's a lot of positive rhetoric going around and meetings that have been happening, including with the US Trade Representative, Jameson Greer, the EU Representative, Maros Seskovic. But the question is, is that actually leading to anything tangible? Are we seeing progress on a whole bunch of complex issues

in the relationships. And we're not actually seeing signs of that so far because the red lines for either side are pretty clear and they remain. So we're seeing better rhetoric, but we're not actually seeing signs of how that's going to lead to a breakthrough in any kind of progress towards a trade framework. So at least a better environment, again, for the conversation, but we kind of need to see the tangible start to emerge here. Hmm.

OK, Ros, thank you so much for being with us this morning and for your thoughts then on those important meetings. President Trump with Xi on the phone and with the German Chancellor Friedrich Merz. That is our EMEA news director, Rosalind Matheson. To another aspect of the trade story now, Donald Trump is famously fond of Scotland where his mother was born. His 10% global tariff is nonetheless ripping through the niche business of making Harris cash.

Tweed, one of the distinctive fabrics of Scotland. Our UK economy reporter, Irina Angel, has been reporting on this with a story that reaches as far as the far-flung Hebrides as well. Irina, good morning. How are the tariffs affecting these specialist businesses in Scotland? Well, good morning. So specialist is the word. Harris Tweed is sort of the champagne of woolen fabrics, if you want, because it can only be made on the remote Scottish Hebridean island.

And it has to be woven at home by one of the just 150 weavers or so on the Isle of Lewis, which is the largest of these islands. And many of these weavers have been doing this for generations.

Of course, Trump's mother, Marianne McLeod, used to be one of the islanders. So she grew up on Lewis before emigrating, age 17, to New York in 1930. But now her son's tariffs risk upending really the livelihoods of islanders and the local economy. So the tweed industry is a huge source of employment on this island where there are only nine people per square kilometer. It helps bring in lots of tourists on cruise ships who then spend big in restaurants and shops.

But it's also ultimately a way of life that dates back to the 18th century. So and all of that is part of the collateral damage of Trump's trade war, because, you know, three this tiny is exports to the US compared to the to the total exports. But it's still subject to the same 10 percent tariffs.

Yeah. What an interesting business to be getting a grip on. In terms of other markets then for Harris Tweed, can...

Can these islanders look for other markets elsewhere and try to avoid the tariffs that way? As you say, it's very few people, and yet it's foundational, so important to their way of life. Yeah, it's very few people. And, you know, Americans are the top buyers of tweed. And the concern is that American brands will sort of stop buying tweed or will buy less of it because of higher costs and just greater uncertainty. And, you know, that might mean less work for weavers and rural communities elsewhere.

So those people might choose to leave the island to work in oil and gas or constructions like many others before them. So to counter this, the mills, especially Harris Street, Hebrides, which is the main mill, is now trying to strengthen links with...

places like South Korea, which is its fastest growing market, or Japan. So they will visit Japan later this year as part of a trade delegation. However, quickly pivoting to new markets is really not easy for a business where completing an order can take up to three months.

They will also have to put in extra efforts to crack down on counterfeits and just raise brand awareness in these newer markets like China. Because what is special about the U.S. is that Harris Tweed really has history with the U.S. Getting a tailored tweed suit was a rite of passage for young men in the post-war era. And, you know, the Kennedys loved it. Ralph Lauren made it part of his iconic preppy American look. And that's really hard to replicate.

Irina, it's a fascinating story and that history is so important as well. But I wonder when you spoke to people on your trip to the Hebrides for this story, they were quite critical of Donald Trump. Well, that's very true. So Trump is not liked at all on these islands. One of the first things I saw when I visited was this anti-Trump banner saying, shame on you, Donald John, Trump.

And then a taxi driver told me how embarrassed she was when she was asked to drive a group of Trump supporters with MAGA t-shirts to Trump's mother's ancestral home and take a photo of them in front of it. So, you know, despite boasting about his golf courses and his Scottish heritage,

Trump spent less than three hours on the island on his last visit in 2018, I think it was. 2008, sorry. And really, the islanders did not like that. These are very proud people. So, you know, if Trump visits, sure, he will be welcome, but he will have to work extra hard to win them over.

This is Bloomberg Daybreak Europe, your morning brief on the stories making news from London to Wall Street and beyond. Look for us on your podcast feed every morning on Apple, Spotify and anywhere else you get your podcasts. You can also listen live each morning on London DAB Radio, the Bloomberg Business App and Bloomberg.com.

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