Impact of Trump Cutting Musk’s Federal Contracts: A Comprehensive Analysis

On June 5, 2025, an intense online exchange unfolded between President Donald Trump and Elon Musk, CEO of SpaceX and Tesla. Trump posted on Truth Social:

“The easiest way to save money in our Budget, Billions and Billions of Dollars, is to terminate Elon’s Governmental Subsidies and Contracts. I was always surprised that Biden didn’t do it!”

Musk fired back, even threatening to decommission SpaceX’s Dragon spacecraft. While much of this rhetoric is political theater, the prospect of canceling contracts with SpaceX and Tesla raises profound technical, legal, and strategic questions. This article examines what would really happen if the U.S. government pulled the plug.

1. SpaceX: The Government’s Linchpin in LEO and Beyond

1.1 NASA Crew and Cargo Services

• Falcon 9 Specifications: 70 m tall, 3.66 m diameter, 7607 kN sea-level thrust, reusable first stage with grid fins and landing legs, $62 million per launch (Block 5).
• Dragon 2 Crew Capsule: Pressurized volume 9.3 m³, SuperDraco abort engines, up to 7 crew seats, propulsive return, NASA-certified under Commercial Crew Program CCtCap.
• Crew Rotations: Since 2020, SpaceX has delivered 12 crewed missions to the ISS; without Dragon, no certified U.S. access for astronauts.

1.2 International Space Station Deorbit Complexities

The ISS has a current mass of ~420 metric tons. SpaceX holds the Phase 2 contract for the Controlled Deorbit of ISS (Deorbit Vehicle): delta-V requirement ≈ 2.5 km/s; propellant mass ~1,200 tons if using LOX/CH₄. Without SpaceX, the U.S. would lack any provider qualified to safely lower the station into the South Pacific Ocean.

1.3 Artemis Lunar Architecture

• Starship HLS Contract: $2.9 billion awarded in 2021 for a lunar lander capable of 100 t to TLI (Trans-Lunar Injection) and 7 t of downmass.
• Timeline: Artemis 3 crewed landing slated for 2026. Blue Origin’s Blue Moon lander faces a 2029–2030 readiness estimate, making SpaceX’s vehicle critical to beating competitive programs in China and Russia.

1.4 National Security Launch Services

SpaceX is one of two EELV (Evolved Expendable Launch Vehicle) providers. Key metrics:

• Orbital insertion accuracy: ±2 km at LEO, ±5 km at GTO.
• Reliability: 100 consecutive Falcon 9 successes since 2018.
• Cost per national security mission: ~$67 million vs. ULA’s Vulcan at $120–150 million.

The U.S. Space Force’s National Security Space Launch 2 contract awards 60% of manifest to SpaceX through 2027.

1.5 Starlink and Starshield

Starlink Gen2 satellites carry 10 W Ka-/Ku-band phased arrays supporting 20 Gbps downlink per spacecraft. The Department of Defense has purchased a dedicated constellation under the Starshield brand, with encrypted X-band and Ka-band links for mobile units and airborne platforms.

2. Tesla: Federal Incentives and Regulatory Levers

2.1 Clean Vehicle Tax Credits & Emissions Trading

Tesla buyers can claim up to $7,500 under IRS Section 30D if vehicles meet battery component sourcing and assembly rules. Since 2010, Tesla has also earned over $4 billion selling Zero Emission Vehicle credits to other OEMs in California and the EU.

2.2 Full Self-Driving and NHTSA Oversight

FSD currently operates at SAE Level 2+, relying on a neural net trained on 7 billion miles of fleet data and Tesla’s Dojo supercomputer. The National Highway Traffic Safety Administration (NHTSA) has opened multiple defect investigations (e.g., unintended acceleration, phantom braking), which could ground FSD Beta updates or mandate massive recalls.

2.3 Gigafactory and Supply Chain Risk

1. Battery Production: Giga Nevada (1 TWh capacity), 4680 cells, integrated cathode/anode lines. Disrupting DOE loan guarantees (original $1.3 billion) could stall cell output by 50%.
2. Semiconductor Sourcing: Tesla designs proprietary chips (FSD Computer v3), manufactured on TSMC 7 nm processes. Any export restrictions on advanced nodes would curb FSD performance.

3. Regulatory and Legal Constraints

Constitutional separation of powers, Administrative Procedure Act (APA) requirements, and Government Accountability Office (GAO) protests would delay any abrupt contract terminations. Lawsuits by SpaceX and Tesla could seek injunctions, citing breach of contract and Fifth Amendment takings.

4. International Implications and Geopolitical Considerations

If the U.S. cedes its commercial launch expertise, China’s Tianzhou resupply and Tiangong station operations gain soft power. Europe’s Ariane 6 remains in test phase, India’s Gaganyaan (2026) lacks orbital crew transport certification, and Japan’s SLIM lunar lander trial is purely robotic. A U.S. retreat hands leadership to adversaries.

5. Technical Risks and Contingency Planning

The Pentagon and NASA maintain limited backup options:

• United Launch Alliance: Vulcan Centaur delayed to late 2025 due to BE-4 engine hot fire issues.
• Blue Origin: BE-7 and Blue Moon lander lack flight heritage; expected readiness 2029–2030.
• Boeing Starliner: Currently in an FAA/AST commercial human spaceflight license review after two Crew Flight Test delays.

Expert Perspective

“Terminating SpaceX contracts without a certified backup will set the U.S. space program back at least a decade,” says Dr. Laura Montgomery, aerospace policy analyst at the Center for Strategic and International Studies.

Conclusion

While the political skirmish between Trump and Musk makes for headline-grabbing drama, the technical and strategic consequences of severing ties with SpaceX and Tesla could undermine U.S. leadership in space exploration, national security, and electric mobility. The web of interdependencies—from ISS deorbit planning to FSD regulations—means any disruption would reverberate through multiple industries and geopolitical arenas.