Investing.com -- Elon Musk has emerged as one of Donald Trump’s most prominent supporters and contributors, donating $75 million to Trump’s America PAC and appearing alongside the former president at various events.
The two have even entertained the idea of Musk taking on a role in a future Trump administration, potentially serving as a government efficiency and deregulation czar.
According to Capital Economics, the Tesla (NASDAQ:TSLA) CEO could try and push for policies that could benefit his own business ventures should Trump win the election.
Among other things, Musk's involvement in a Trump administration could be aimed at preventing a complete deterioration of US-China relations, which would be crucial for Tesla's Giga Shanghai factory, a facility that accounts for 40% of the company’s global vehicle production capacity.
“Admittedly, Tesla doesn’t import any of its China-made EVs into the US,” said Paul Ashworth, Chief North America Economist at Capital Economics said in a note.
“But Musk would be rightly wary of a backlash from the Chinese government if Trump followed through on his threat to impose tariffs of up to 60% on Chinese imports.”
Moreover, Musk would likely oppose any moves to scrap EV subsidies introduced under President Biden’s Inflation Reduction Act (IRA), as well as efforts to enact strong anti-green energy policies.
The potential appointment of Musk as a government efficiency and deregulation czar raises questions about his willingness to commit time to the role and the potential outcomes of such an initiative.
Capital Economics points to Musk's management of Twitter, now X, where he reduced the staff by 80% without causing the platform to collapse, despite technical issues and a loss of advertisers.
“That said, the exodus of advertisers and the slump in the company’s valuation, which could also be down by 80% since Musk’s takeover two years ago, suggest it could hardly be described as a success,” Ashworth added in the note.
The economist also touches on the possibility of Musk supporting Trump's efforts to politicize civil servant positions, referencing Trump's past executive order to create a new employment category that could strip protections from federal workers. This move, which Biden reversed, could be reinstated by Trump if he returns to office.
In terms of macro impact, Ashworth notes that while a Musk-led government efficiency initiative might have a limited impact on the broader economy, it could significantly affect the quality of government data and the market’s dependence on official reports.
“At the extreme, markets may shift their focus away from official government reports, focusing more on alternative measures produced by the private sector,” the note concludes.