On the third page of the slide deck issued by Tesla to its investors on Wednesday was a sentence that spoke volumes. “This dynamic, along with changing political sentiment, could have a meaningful impact on demand for our products in the near-term.”
The dynamic that Tesla was referring to is the tariff policies of the Trump administration, which have upended global trade. But the real meat was the three words “changing political sentiment”, which have been taken to mean the damage done to the company’s reputation, sales and brand by its founder, chief executive and dominant shareholder’s close association with the Trump administration.
As almost everybody on the planet knows at this stage, Elon Musk has carved out a role for himself as the accountant from hell in the current US government. As head of Doge (Department of Government Efficiency), Musk and his minions have gone through the federal government, looking to make costs savings. Thousands of employees have been fired and numerous programmes aimed at helping disadvantaged Americans have been cancelled, whittled down or are under threat.
Musk did not set out to win a popularity contest – just as well, given his abrasive style – but he seems to have underestimated the impact of his growing unpopularity. Sales of Teslas have tanked. The electric car maker’s profits are down 39 per cent in the first three months of the year, and its shares have fallen steadily since Musk took up his role with the Trump administration. Something in the region of a quarter of Musk’s wealth has been wiped out, although he remains one the wealthiest people in the world, with assets of over €300 billion.
Late-spring flowering plants can’t wait for summer to get started
‘There were four girls raped in front of us. Their mother cried for their safety’
Missing Kerry farmer Michael Gaine: ‘Mystery’ is the word that repeats like a mantra
Heilung: Fans dress up to enjoy the band’s alternative and genre-defying live spectacle
He has now announced that he will be stepping back from Doge to spend more time with his money. He said on Wednesday that he would refocus on Tesla but would retain a role as the figurehead of Doge – arguably the worst of both worlds. Anyway, the company’s shares bounced and one suspects thousands of federal employees breathed a sigh of relief.
[ Elon Musk’s Doge era puts Tesla in the doghouseOpens in new window ]
Students of classical economics and other insomniacs will no doubt see Adam Smith’s hidden hand at work. The 18th century Scottish economist coined the term to describe how if everybody acts in their own self-interest it can produce an outcome which is beneficial to everyone. Some would credit the work of Irish economist Richard Cantillon as instrumental in the development of the idea which is the cornerstone of the laissez-faire capitalism and in theory is the source of American economic dominance.
Be that as it may, the net impact of thousands of people not buying Teslas has been to force Musk to pull back from his efforts to dismantle the federal government, something very few people want or voted for.
It is a straightforward example of what may be emerging as a strangely comforting trend; the markets may yet save us from the madness of the Trump administration.
Arguably the biggest demonstration of the Borg-like nature of the market has been Trump’s climbdown over his plans to impose tariffs on US imports from almost every country in the worlds.
The reciprocal tariffs as he called them were introduced on ‘Liberation Day’ – April 2nd – and came into effect on April 5th. Most of them were suspended on April 11th after the carnage they caused in global financial markets threatened to spill over into the US bond market and ultimately the ability of the US to finance its huge national debt. Again, the rational and self-interested actions of investors – to cut their losses and seek safer places for their assets – produced an outcome that most would agree was in the wider interest.
[ Elon Musk forced back to the boardroom as Doge ‘blowback’ pummels TeslaOpens in new window ]
The markets continue to be roiled by Trump’s actions and his pronouncement on Tuesday that the 145 per cent tariffs he has imposed on imports from China would “would come down substantially”, can best be viewed as a further attempt to reassure the markets.
Likewise his comment that he has “no intention” of firing the chairman of the US Federal Reserve, the world’s most powerful central banker and one of the few checks on his highly autocratic style of presidency. Trump had spent much of the previous week attacking Jay Powell for not cutting US interest rates in response to the economic headwinds that Trump’s actions had generated. The attacks further rattled the markets and the backtracking over Powell is the inevitable consequence.
[ Explainer: what’s Trump’s beef with US Fed chairman Jerome Powell?Opens in new window ]
Where things go from here is dangerous to predict. Trump has blinked not once, but three times when the consequences of his actions manifested themselves – via the hidden hand – in falling stock markets, falling US bond prices and a weak dollar. The pattern is clear.
The notion that capitalism is the only real constraint on Trump’s impulsive and destructive instincts may be an uncomfortable one for many of the US president’s opponents. But it shouldn’t be a surprise.
