Disclaimer: This explainer is based on information and developments available up to July 2, 2025 (EDT). The political and legislative situation surrounding the “Big Beautiful Bill,” and the interactions between U.S. President Donald Trump and Elon Musk, are evolving and may change after this date.

KATHMANDU: On July 1, 2025 (EDT), the U.S. Senate passed a controversial $3.3 trillion tax and spending package known as the “Big Beautiful Bill,” championed by President Donald Trump. The legislation includes broad tax cuts, deep reductions in social programs like Medicaid, and tough immigration measures.

Tech billionaire Elon Musk, once a close ally of Trump and former head of the Department of Government Efficiency (DOGE), fiercely opposed the bill, criticizing its impact on the national debt and threatening to form a new political party. Their public feud has intensified, raising questions about the bill’s effects on Musk’s businesses and the 2026 midterm elections.

What is the “Big Beautiful Bill” and why has it sparked controversy?

The “Big Beautiful Bill” (BBB) is a sweeping budget reconciliation package passed narrowly in the U.S. Senate and awaiting House approval. It aims to enact significant domestic policy changes, including expanded tax cuts, massive spending, cuts to healthcare and food assistance programs, and tough immigration measures like mass deportations.

The Congressional Budget Office projects the bill will add approximately $3.3 trillion to the federal deficit over nine years, which is the largest increase in U.S. debt history.

Critics point out that the bill reduces federal revenues more than it cuts spending, thereby widening the deficit and undermining fiscal sustainability.

The bill’s size and scope have triggered fierce debate within and beyond the Republican Party. While GOP leaders like President Donald Trump champion it as a vehicle to advance their political agenda, some Republicans express concern about the bill’s fiscal impact and policy compromises made in the Senate version.

Democrats oppose the bill primarily because of deep cuts to social safety nets and the potential damage to healthcare programs. The contentious nature of the bill reflects the broader polarization and challenges in U.S. budget politics.

Why is Elon Musk vocally opposing the bill, and how has his stance evolved?

Elon Musk, once a major Trump supporter and campaign donor, has emerged as one of the most outspoken critics of the BBB. Musk denounces the bill as a “disgusting abomination” and warns it will lead to “the biggest debt increase in history.” His opposition stems from his tenure leading the Department of Government Efficiency (DOGE) early in the Trump administration, where he sought to cut government waste and streamline public services. Musk views the BBB’s massive spending and tax cuts as negating his cost-cutting efforts.

Their relationship soured after Musk publicly condemned the bill, which led to a dramatic fallout with Trump. The two briefly appeared to reconcile, with Musk expressing regret for going “too far” and Trump wishing him well, but tensions quickly reignited when Musk renewed his criticism as the Senate prepared to vote on amendments. Musk accused GOP lawmakers who campaigned on spending cuts but supported the bill of hypocrisy, threatening political consequences. He has also called for a new political party, deriding the existing system as a “one-party country” or “PORKY PIG PARTY,” signaling his disillusionment with both major parties.

How has Trump responded to Musk’s criticism and what impact does this have on their relationship?

Trump responded aggressively to Musk’s critique by threatening to scrutinize government support for Musk’s companies. He suggested his Department of Government Efficiency (DOGE) should re-examine subsidies and contracts awarded to Musk’s ventures, claiming Musk receives more government support than any individual in history. Trump warned that without these subsidies, Musk’s companies—like SpaceX and Tesla—would struggle or even fail, implying that cutting this support would save taxpayers “a fortune.”

On July 1 (June 30 in the United States), President Donald Trump warned that Elon Musk, born in South Africa, might “probably have to close up shop and head back home” if his administration reduces subsidies provided to Musk’s companies like Tesla and SpaceX.

Musk fired back on social media, insisting government subsidies to his companies should be “cut it all. Now.” This public spat has turned their previous alliance into a very public feud.

The conflict has unsettled investors and observers, as Musk’s companies rely heavily on government contracts and regulatory credits. Tesla’s stock experienced volatility amid the dispute, with shareholders wary of the potential political and financial fallout.

The feud also highlights the risks of mixing business interests with political alliances, especially when government policies directly influence a company’s success. It remains unclear how much this personal and political tension will affect the bill’s passage or the long-term relationship between Musk and Trump.

How do Musk’s businesses depend on government contracts, subsidies, and regulation?

Elon Musk’s companies, especially SpaceX and Tesla, are deeply intertwined with government contracts, subsidies, and regulatory frameworks. SpaceX holds around $22 billion in government contracts, primarily with NASA and the Department of Defense, providing essential services like the Starlink satellite internet system, which has been instrumental in military and humanitarian operations, including in Ukraine.

Tesla benefits from federal electric vehicle tax credits, regulatory credits, and subsidies that have helped accelerate its growth and adoption of EV technology. Additionally, Tesla’s expansion into autonomous driving and robo-taxi services requires ongoing regulatory approval from agencies such as the U.S. National Highway Traffic Safety Administration. Neuralink, Musk’s brain-computer interface company, is also subject to FDA oversight for its clinical trials.

The government’s support has been critical in providing the financial and regulatory environment for Musk’s ventures to flourish. However, changes proposed in the BBB, such as phasing out the $7,500 EV tax credit by September, threaten to reduce Tesla’s market incentives. The potential rollback of subsidies and contracts is a significant concern that fuels the Musk-Trump conflict, as the companies’ future profitability could be impacted.

What are the political dynamics surrounding the bill and Musk’s involvement?

The BBB has exposed rifts within the Republican Party, with some GOP lawmakers expressing dissatisfaction with the Senate’s version, viewing it as too expansive or poorly negotiated. The House Rules Committee members Ralph Norman and Chip Roy criticized the Senate changes, threatening to oppose advancing the bill. Meanwhile, the Republican leadership, including Speaker Mike Johnson, is working to navigate these divisions to meet a July 4 deadline to send the bill to Trump’s desk.

Musk’s vocal opposition adds another layer of complexity. While he is a billionaire with considerable influence, experts doubt his ability to form a winning political coalition or third party, given the entrenched two-party system and the divergent concerns of Democrats and Republicans. Musk’s call for a new “America Party” is seen as more of a protest against current politics than a viable electoral force.

Republicans worry that Musk’s feud with Trump could harm their midterm prospects by highlighting internal conflicts. Democrats have pledged to use every procedural tool to block the bill. Thus, the bill’s fate is uncertain amid a highly polarized political environment.

How could the bill affect Musk’s businesses in practical terms?

Practically, the BBB could impact Musk’s companies through the elimination of key tax credits and subsidies, regulatory changes, and the political climate it generates.

Tesla faces a direct hit from the bill’s proposal to end the $7,500 EV consumer tax credit after September 2025, which could reduce sales incentives and slow adoption of electric vehicles. This provision has unnerved Tesla investors and contributed to recent stock price declines.

SpaceX’s extensive government contracts, especially with the military and NASA, could come under scrutiny or reduction if Trump follows through on threats to cut subsidies as a response to Musk’s criticism. While some analysts believe the impact on SpaceX’s contracts might be limited (“the bark is worse than the bite”), the political tension raises uncertainty.

Neuralink and Tesla’s autonomous driving technologies depend heavily on regulatory approvals. Any shifts in regulatory approach could slow development or deployment of cutting-edge technologies. The bill’s overall impact on government spending and priorities may also affect research funding and regulatory environments relevant to Musk’s ventures.

What are Musk’s political ambitions and what challenges does he face?

Frustrated with both major parties, Musk has threatened to form a new political party called the “America Party” that would prioritize fiscal responsibility and genuine care for the people. He argues the U.S. currently operates under a “uniparty” system dominated by Democrats and Republicans, which he dubs the “PORKY PIG PARTY.” Musk promises to create this alternative swiftly if the BBB passes.

However, political analysts remain skeptical of Musk’s ability to build a viable coalition. The U.S. political system heavily favors the two major parties, making third-party success rare. Additionally, the differing priorities of fiscal conservatives (concerned about debt) and Democrats (focused on protecting social safety nets) complicate coalition-building.

Musk’s involvement in politics has also frustrated investors and politicians alike, who prefer him focused on business. His public feud with Trump, a polarizing figure, could alienate potential supporters on both sides. While Musk’s political ambitions highlight growing dissatisfaction with traditional parties, significant hurdles remain for any new party to gain traction.