Musk’s Policy Push Sparks Tesla Volatility Concerns as Trade Tariffs, Inflation Add Fuel to Market Jitters

Morgan Stanley analysts suggest Elon Musk’s recent public clash with President Donald Trump may not be a spontaneous outburst but part of a calculated communications strategy. In a research note, the firm said Musk’s vocal criticism of the administration’s latest “big beautiful bill” and ballooning federal deficits is likely aimed at achieving a specific political or regulatory objective.
While acknowledging that the political controversy could stir negative sentiment around Tesla Inc. (NASDAQ: TSLA), Morgan Stanley believes the company’s management is well aware of the reputational risks. The firm reaffirmed Tesla as its “Top Pick” in U.S. autos, noting Musk’s policy engagement is “inseparable” from the company’s trajectory.
“This isn’t new,” the report stated. “Investors may once again be underestimating Musk’s persistence, or the financial and reputational risk he’s willing to take to push a broader agenda.” If tensions with the White House escalate, the analysts caution Tesla shareholders should brace for heightened stock volatility.
Musk’s criticism comes amid a broader debate about U.S. fiscal health, with the federal budget deficit now a core concern for the Tesla CEO. The “pork-filled” legislation he lambasted is under Senate scrutiny, as it threatens to add $2.7 trillion to the national debt through 2034.
Meanwhile, President Trump’s signature trade policy scored a legal win. A U.S. appeals court ruled in favor of maintaining the administration’s controversial tariffs, dismissing objections from small businesses. The court cited ongoing trade negotiations and national security justifications as outweighing economic harm.
The economic implications of Trump’s tariffs are beginning to surface. Economists expect May’s Core Consumer Price Index (CPI) to show the steepest monthly increase since January, likely driven by rising import costs. The CPI release, scheduled for Wednesday, is expected to show a 0.3% rise in core inflation, pushing the year-over-year figure to 2.9%.
This uptick complicates the Federal Reserve’s path forward. Although markets anticipate the Fed will hold interest rates steady in the 4.25%-4.50% range at next week’s meeting, officials are closely monitoring how the tariffs affect inflation and consumption.
Compounding the uncertainty, the Bureau of Labor Statistics (BLS) has cut back data collection due to federal staffing reductions, raising concerns about the accuracy and completeness of upcoming inflation data.
With trade risks, inflation pressures, and political drama converging, investors are navigating a fragile landscape. Musk’s political involvement may stir controversy, but for now, Tesla remains a standout albeit volatile bet in a turbulent market.
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