Tensions rise as Trump and Musk clash following White House exit
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This is Andrew Peach with World Business Report. Today, the end of a bromance. He hasn't said bad about me personally, but I'm sure that'll be next. But I'm very disappointed in Elon. I've helped Elon a lot. Elon Musk says he won the election for Donald Trump and the president should be impeached.

The latest on the exchange of insults and what they're really disagreeing about on the way. Also, a look at the markets for you with Tesla shares down 14%. Later in the programme, how China came to control 90% of the mining and processing of rare earth minerals.

And as a Japanese company loses contact with the spacecraft it's trying to land on the moon, we'll look at lunar business opportunities. First, though, that furious row raging in recent hours between Donald Trump and his former advisor Elon Musk, less than a week after the Oval Office love-in when he left the administration. Mr Musk has repeatedly said the president's new tax legislation will bankrupt America...

which got this response. Elon and I had a great relationship. I don't know if we're well anymore. I was surprised because he said wonderful things about me. He couldn't have nicer, said the best things. But I'm very disappointed because Elon knew the inner workings of this bill better than almost anybody sitting here. And if you saw the statements he made about me, which I'm sure you can get very easily, it's very fresh on tape.

He said the most beautiful things about me. And he hasn't said bad about me personally, but I'm sure that'll be next.

But I'm very disappointed in Elon. I've helped Elon a lot. Well, as the president predicted, things have got very personal indeed since then, with the billionaire accusing Mr Trump of ingratitude for his role in winning the US election, Mr Trump threatening to terminate Elon Musk's government contracts, to which he replied, go ahead, make my day. And in the last hour, adding that Donald Trump should be impeached and replaced by the vice president,

J.D. Vance. Lily Jamali is watching all this. She's our North America tech correspondent. Lily, I mean, everyone's been saying since these two got together that it would fall apart, but nonetheless, it's been pretty dramatic and sudden.

It has been far more spectacular than I think even the most pessimistic people would have predicted. You have two of the biggest egos on this side of the pond going at it. Donald Trump kicking things off this morning in the Oval Office and then the two of them going back and forth on their own social media platforms. X in the case of Elon Musk and Donald Trump taking to Truth Social. Trump saying that Musk is...

you know, is upset about this big spending bill because he's upset about the elimination of electric vehicle credits that help Tesla. They encouraged buyers to go electric with their vehicles and then getting personal, saying he's very disappointed in Elon and that he's helped Elon, quote, a lot.

And then you have Musk responding that without him, Trump would have lost the election and even threatening to start a new political party for the 80 percent in the middle, as he puts it. I mean, it seems at this point as though they're just trying to needle each other and find things to say that they think might hurt. But the origins of this argument come down to the management of the U.S. deficit and whether how much spending there should be from the U.S. government.

That was the initial argument. Musk saying this would be terrible for the U.S. debt and the deficit, which is what we get yearly. And the debt is already quite substantial. This budget bill that Trump has been pushing through will increase it by trillions of dollars. That's according to the nonpartisan CBO, which monitors these things. I think there's something deeper happening, though, between these two men. They're sort of trying to prove who has more clout.

I'm very familiar with that kind of thing, spending so much time as I do in Silicon Valley. They want to show, you know, that the other one needs them more. And I think certainly going into this election, Donald Trump did need Elon Musk, but Musk partly through his foray. Sorry, forgive me. Donald Trump going into this cryptocurrency sector, launching that controversial meme coin and so much else has changed.

significantly enriched himself and now seems very comfortable putting Musk in his place. What could the real world consequences be of this argument between these two men, whatever actual policy disagreements or egos underpin the whole thing? The most obvious one seems to be the potential impact on US space exploration.

That's right, because during his time in the White House, Elon Musk was able to secure new government contracts.

regulatory rollbacks that he was pushing for. Investigations were dismissed on Donald Trump's watch, things that had been launched under the Biden administration. Perhaps some of those come back. Who knows? But the immediate thing that we saw was the NASA administrator that Donald Trump had chosen, a guy named Jared Isaacman, Elon Musk's friend, and

was suddenly no longer his choice for the job. We saw that announcement over the weekend when they were still playing nice. Now that the gloves are off, who knows what else could be leveraged against Elon Musk. But certainly Donald Trump has plenty of leverage

given the fact that he now runs the executive branch of the US government. Lily, thank you. I should probably mention the latest twist in all of this is Trump ally Steve Bannon calling the New York Times to suggest that Elon Musk ought to be deported. Live to Troy Hooper now, co-head of Equity Capital Markets, based in California. Troy, thank you for being with us on World Business Report. This has seen a big shock to the markets in terms of Tesla shares.

Yeah. Hi. Thanks for having me, Andrew. Maybe we should call this the big, not so beautiful breakup. It's gotten pretty ugly.

And while many in the Twitter sphere were entertained by the war of words between President Trump and Elon Musk today, Tesla investors were not so amused. The share price for Musk's electric car company fell 14% as Trump threatened to pull those government contracts from Musk's companies. And just today, Tesla lost $152 billion in market capital.

And seeing it through the prism of the markets is always so interesting as it cuts through what's just words to the real world consequences. And the markets are worried about the impact of Donald Trump running the US government and trying to cut Elon Musk's companies out of it, basically.

Yeah, that's right. Up until today, really, there was a real surge in Tesla's stock. It rallied 22% in May as Musk finished up his work at the Department of Government Efficiency. It's really that quest for government efficiency that is at the heart of this quarrel.

As soon as he wrapped up his work at the White House, Musk sharply criticized Trump's spending bill, saying it had too much government waste. So now we've got a very messy, very public fallout between the two billionaires. And I think this brouhaha is going to continue to escalate. And let me just ask you about another thing that's emerged in this war of words, which is the suggestion from Elon Musk that,

that Donald Trump's tariffs will cause a U.S. recession. Now, to be fair, a lot of economists have been saying that, and suddenly Elon Musk seems to agree with them. Yeah, the interesting thing about recessions is there's a lot of predictions for them more than, you know, actually occur. So it's easy to sound intelligent when you're predicting, you know, kind of bad things to happen to the market. Now, you know,

Elon Musk and these economists very well could be right. There are a lot of problems with the U.S. economy. These deficits have gotten out of control. There does need to be some fiscal discipline exacted in the American system. And we'll just have to see. I mean, I think there's some good news and bad news playing out in the market. Today's news really overshadowed what started out as good news, which is that

President Trump and President Xi in China had actually had a phone call and were trying to iron out some of these trade disagreements.

Troy, thank you. Troy Hooper is co-head of Equity Capital Markets for Merger Market in California. Now, we might have expected the big news in Washington today to be that phone call between President Trump and President Xi of China, or maybe the visit of Friedrich Merz, Germany's new chancellor, to see Donald Trump for talks. He's trying to get a better deal on trade tariffs for Germany because there's concern they could have a detrimental impact on the economy.

on the German economy that's already got some difficulties around it. Penny Nass is global public policy leader at the German Marshall Fund of the United States. I spoke to Penny and asked whether the meeting had been overshadowed by this round now between Donald Trump and Elon Musk.

Yeah, I agree. This meeting got kind of overtaken by that row with Musk, which I think may be OK for merits in the long run. Oh, tell me why, because I would have thought if you'd been to Washington, you'd had a decent encounter with Donald Trump before the world's press. You'd want everyone to know about it.

Well, I think that you still can have that, but it was an opportunity, I think, for Merritt to get across a lot of his points and to emphasize some of the things that I think were important.

while also, you know, establishing a good rapport. And I think all of that happened with kind of the drama that generally comes with these meetings being taken by someone else. So merits gets to come out of it relatively clean and with, I think, a good relationship established. Unscathed. So Germany obviously is focused very much on trade because it stands to lose quite a lot if Donald Trump's threatened tariffs continue apace.

Absolutely. I think that if you look at the various tariffs that the president has put in place, both the 10 percent or, you know, countrywide tariffs known as the Liberation Day or reciprocal tariffs to the more specific sectoral specific tariffs known as the 232 tariffs.

Those tariffs are on sectors that just are aimed very squarely at the heart of the German economy. And so tariffs and the trade relationship is incredibly important and was incredibly important, I think, in today's conversations. And Germany's already in difficulties, isn't it? Because it's not as productive as many other economies around the world.

Big firms have got more strained relations with organised unions representing the Labour force. There are already some big challenges for Friedrich Merz, perhaps some of these reasons as to why he was elected.

Germany does have productivity challenges. Some of those are linked to the labor markets, and then labor market reforms will be something that Meritz has talked about Germany needing to do. But then separately also, you have energy prices that are higher in Germany. And if you look at many of the heavy industries in Germany, their productivity and their competitiveness is lower than it could be because of the high energy costs in Germany.

And so I think those twin challenges, along with lack of digitalization in Germany, have put it on the back foot. It was an economic miracle for so long and had grown so well and was just such a manufacturing powerhouse. And I think that now is an opportunity for Merz to come in and try to address some of that. But he's got to deal with this tariff situation first. I mean, apart from a better deal on tariffs, what does he want from Donald Trump?

I think he wants a better deal on tariffs. I mean, for him, it's very I mean, the tariffs are very important. They will put in place potentially financial measures that could encourage companies to invest moving forward and in other locations.

So how Germany sits when compared to the United States as well and how Germany sits when compared to the rest of the world is important. What's really, really important about the U.S.-Germany relationship is the transatlantic investment. And so, so much of Germany's trade with the U.S. is intra-company trade. It's going to the BMW plant in South Carolina and the Mercedes plant in Alabama and

And so that is really sticky. And so they really that's why the tariffs are really, really important for U.S. Germany. And, you know, perhaps as some kind of olive branch, as much as anything, Germany's been pretty enthusiastic about increasing defense spending, which, of course, is what Donald Trump and his administration want to hear. Absolutely. Although you did hear the president say today that he wanted he was excited to see them spend more, but within limits, right?

So that was the first time I heard the president state that. So to me, that's an encouraging sign that our European allies are doing more. And the president is acknowledging that.

Do you get the sense that Friedrich Merz is going to get anywhere with his wish list with Donald Trump? You know, I thought the mood music today was very good. I think the U.S.-EU conversations around a trade deal have also been going very well. You've seen German companies such as Volkswagen hint that they're going to be making investments in the United States. So I think you're starting to see the elements of some good mood music around the potential of trade.

some kind of US-EU deal coming together in the near future. That's Penny Noss from the German Marshall Fund. Millions of men quietly struggle with low testosterone. Now there is a new treatment under development. Akisi's Biomed is pioneering a groundbreaking medical solution designed to instruct the body to produce its own natural testosterone. You can be a part of this breakthrough.

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Export controls have disrupted supplies and triggered production turmoil in various industries in Europe and America. Matthias Zink is CEO of the powertrain and chassis division for the German car parts firm Scheffler AG. He's already seeing the impact.

I have myself about 50 part numbers at risk because of continuous short supplies. All you can say is it's a very serious situation. It's very, very tough actually getting the necessary approvals and more and more the supply chains are draining out or are empty. But first line shutdowns we already see, or at least we're hearing that in our community of suppliers, that the first shutdowns are taking place.

Frank Fannin is the managing director of Fannin Global Advisors, but used to work in Donald Trump's first administration on energy policy. He told me that China controls around 90% of the mining and processing of rare earth minerals and that concerns over its dominance in the sector go back a very long way. This is an absolutely existential question.

The Chinese have a dominant position across the entirety of the supply chain in rare earths, both from the supply, so the mining of the rare earths, as well as the processing of the rare earths. And that's where they have exponentially increased

significant dominant position. I think it's important to put this in a bit of context. If one considers OPEC, we all know the OPEC, and at their ascendance, at their apex of power, OPEC controlled roughly about 45% of the global oil market. Now, consider China's control of rare earths. It's well over 90% control. And yet,

In post the oil crisis, the United States led other countries eventually to develop the International Energy Agency to create stockpiles of oil all around the world to to reduce the utilization of the oil weapon. And it was effective.

We don't have that in the case of rare earths today, but certainly China's activity, the concentration by an adverse power and their ability demonstrated over and over again to use that leverage effectively.

to affect other geopolitical considerations. It's on the rise. So part of this is where the rare earths happen to be deposited. I get that. There's a bit of geographical luck involved, but it's much more than that, isn't it? China seems to have seen this coming, prepared for it and secured its stranglehold while the rest of the world wasn't really noticing.

You're exactly right. Although it's not as recent of a phenomenon, they have been developing this over time, but we have had warning signals that we in the West, by and large, have ignored. I would point us, really, I would say it started in earnest in 2010, where China banned the export of rare earths to Japan, then to the United States, over a fishing dispute. The Japanese were kind of fed up, finally, with Chinese illegally fishing in their waters.

They took action and the Chinese didn't like that and they banned the export of rare earths, sending the global market into a bit of a fit. The result of that was the US and Japan joined together with Europe.

to initiate a WTO filing against China. But in the intervening years, China went from banning the export of rare earths to dumping rare earths on the market. And in so doing, putting the one only, contributed the one only rare earth project in the United States into bankruptcy.

So China's power here isn't just in their banning or restriction, which is material, but also their ability to undermine the investment thesis to develop an alternative supply chain altogether. Tell me what sectors are worst affected by this. Where is this being most acutely felt?

clean energy, new energy technology systems, a lot of talk around the defense industry. You know, rare earths, by the way, I think it's important to acknowledge it's a really tiny market. That's one of the other challenges here. The entire global rare earths market is valued at about $12 to $13 billion U.S.,

Now, compare that to a global market in copper for $270 billion, or oil is $4 trillion. So it's very small. But the importance of rare earths, a very small volume of material, has a decisive impact on functionality. You've worked in the Trump administration. He has a particular negotiating style with other countries, which sometimes is very effective, sometimes less so. How is it going to play out in terms of dealing with China on this issue?

Obviously, tariffs, a trade component, is an important part. I mean, I would reflect back even further. I would reflect back on President Reagan's myth that if you want more of something, subsidize it, and if you want less of it, tax it.

I think, obviously, the Trump administration is looking at the taxing part quite seriously. We have to create a – back to that power of China to dump product on the market. We have to create an alternative supply chain. And the only way to do that without having a state-run economy is to privatize, is to motivate the private sector to invest. And they're only going to do that if they can realize a return. So we have to have meaningful market interventions to call out –

the cheaters and have reasonable, appropriate countermeasures to address that. In what way is China cheating here? They're just being smart, aren't they? I would say, I don't know if they're being smart, but I can see it from their point of view, it's completely irrational. I don't like what they're doing, but it's certainly his ability to demonstrate considerable amount of

amount of power. Here's the thing I would say is, you know, we learned the hard way in Europe that Russia actually turned out was not a reliable supplier of natural gas, although the gas was cheap.

We can't be continuing to be lulled into a dependency state with China because we want cheap stuff from China. That's antithetical to, to what we're seeking to do here. So I would propose that the Trump administration has been focused on this issue in the first administration, but is really focused on it. Currently the, the issuance of multiple executive orders to really focus government attention on this question. Um,

The looking to mobilize new finance instruments that the U.S. government has to help co-invest in mining projects and in other countries. These are absolutely critically important steps. And I think they can be decisive. But we really need other countries to also join and call out the predatory nature and create an alternative.

That's Frank Fannin, who's the managing director of Fannin Global Advisors and used to work for Donald Trump in the first administration on energy policy. Now, a Japanese private space firm says it's failed to make contact with its lunar lander on its second attempt to be the first non-US firm to land an uncrewed spacecraft on the moon.

The firm, which is based in Tokyo, iSpace, said it had been unable to make contact with the craft, which is called Resilience. The flight data shows the lander's altitude fell rapidly to zero just before touchdown was due a couple of hours ago after an hour-long descent from lunar orbit.

Well, I've been talking about the business opportunities on the moon with Namrata Goswami, who's Professor of Space Security at Johns Hopkins University. What iSpace is doing is that it is talking about basically enabling a business case for the moon. So in 2023, iSpace

attempted to land for the first time. And at that time, they had a contract with NASA that if they were able to scoop up resources, they are going to sell it to NASA as a proof of concept. So that is why this mission is so game-changing because it's about the...

the opening up of the moon for business. And more importantly, they are utilising Japan's space mining legislation to licence their missions. I suppose we are reassured when it's basically governments who are regulating this kind of activity, that there's a bit of coordination going on, that it's all done safely. Once we're down to small private companies...

Who's making sure it's all OK? So under the Outer Space Treaty of 1967, states are responsible for the activities of their private sector. So Japan is a member of the Outer Space Treaty. So is the US. So is China. So is India. So while you have small space startups, including, for example, larger companies like, for example, SpaceX or Blue Origin, they have to be licensed to

In the state that they register. So, for example, I-SPACE is being licensed by Japan to do exactly what it's doing. So to answer your question in short, states are responsible for the regulation as well as that these missions are safe, that they are within the Outer Space Treaty stipulations.

Because I suppose in some ways you think, well, it'd be a shame for iSpace in Japan to be working on that technology if someone else in the United States or, I don't know, Finland is also trying to work on it. But then you might say, well, but that's how competition works. It's the competition that

drives the success that drives technology forward? Yeah, so that's a great question to ask, because as this mission is happening with an attempt for a second landing, iSpace has actually signed an agreement with Draper, which is an American company, for their next mission to the moon. So what is interesting is that because Japan is a partner with the U.S.,

for the Artemis missions, which is supported by the Artemis Accord. I-Space is now vying for contracts under the Commercial Lunar Payload Service that supports American companies like Astrobotic, Firefly. And so they are now becoming a partner of that. So while they are competing to build capabilities, they're also competing to be the best collaborators for, say, for example, Mars.

missions like the Artemis missions to the moon. And when we talk about the business opportunities there might be, is that only really going to be for billionaires and Katy Perry to be able to do some space tourism or is other opportunities beyond that kind of thing? What is so interesting to me based on my research is that especially after the fall of the Soviet Union and with the rise of commercial space in the US, it

It seems like with a reusable launch, space access is becoming much more cheaper. And then you have countries like India, China, building rockets that are able to take more and more for less price. So in that context, when we talk about, for example, say the business case on the moon,

Companies like iSpace are focusing on, for example, resources like water ice that can be turned into fuel, for example, if you want to build, say, nuclear fission in the future. You know, helium-3, that is a very important element for that particular capability. And then finally, sustainable settlement.

That's Nomurata Goswami from Johns Hopkins University. So, if you've just joined us, the main news is that the world's richest person and the most powerful politician on the planet are at loggerheads right now. Donald Trump and Elon Musk, great mates for a while, not so much...

in the last few hours. You can follow the latest on the live page at bbc.com slash news. In the last hour, we've heard from NASA responding to Elon Musk's threats to decommission SpaceX's Dragon spacecraft, essential for NASA's operations. They say they'll continue to execute the president's vision for the future of space. More at bbc.com slash news. From me, Andrew Peach, and the team here on World Business Report, thanks for being with us.