The bitter break-up of Donald Trump and Elon Musk could ripple through Australia’s economy

While entertaining for some, Trump and Musk’s public feud threatens Australian trade as tariff policies harden and global markets brace for impact, writes economist Parvinder Kler

The current tete-a-tete played out in the public domain between Donald Trump and Elon Musk is the culmination of an uneasy alliance between two huge personalities with very differing economic views.

Before it exploded, the relationship started unravelling with unedifying exchanges between Musk and Peter Navarro, Trump’s senior counsellor for trade and manufacturing over tariff policy.

Now exacerbated by the furore of the ‘big and beautiful budget bill’, the skirmish potentially impacts on Australia both directly and indirectly.

President Donald Trump speaks during a news conference with Elon Musk in the Oval Office of the White House, Friday, May 30, 2025, in Washington. (AP Photo/Evan Vucci)

At a direct level, this strengthens the pro-tariff camp, given Musk’s proclivity to support international trade, and his break with Trump will weaken the pro-trade brigade within the president’s cabal of advisers.

While Trump has shown a willingness to hold back on tariffs, the trend is nonetheless to entrench them – including with Australia.

Indirectly, the US-China trade war will impact the Australian economy given China is our main trading partner.

Any negative impact on China’s economy will reverberate on our export sector.

Both these events will lead to a dampening of expectations on economic growth, leading to fears of a rise in unemployment as the economy stalls.

In this photo illustration, social media posts by U.S. President Donald Trump and Elon Musk are displayed on a smartphone on June 05, 2025 in San Anselmo, California. Photo: AFP

It is possible however that consumers will enjoy lower prices as an excess of imports flow into Australia as countries attempt to find new markets, plus consumers will face lower interest rates as the RBA attempts to refloat the economy.

Interestingly, this will yield greater competition in the EV sector, as Tesla loses favour with the American administration, forcing Musk to stop the market share bleed overseas. Overall, this spells bad news for Australian manufacturing, as they may not be able to compete with lower priced imports, and for exporters, who will face a shrinking global market for their products.

Associate Professor Parvinder Kler is an economist at Griffith Business School, Griffith University

Associate Professor and economist Parvinder Kler of Griffith Business School, Griffith University

Originally published as The bitter break-up of Donald Trump and Elon Musk could ripple through Australia’s economy