In an unexpected re-alignment of political and economic forces, three men — a modern triumvirate of wealth and power — find themselves drawn into an increasingly complex relationship of competing and opposing forces, now at odds with the interests which originally brought them together.
U.S. President Donald Trump, Chinese President Xi Jinping, and Elon Musk — business mogul and Renaissance man extraordinaire to some — are closely intertwined with one another’s interests. What is the challenge for each, and what are the opportunities of which each may take advantage?
Trump believes he needs the tariffs he has imposed on China’s exports to the United States to bring Beijing to the table for comprehensive negotiations on China-U.S. trade. Foremost in Trump’s mind with respect to China would likely be the complete shutdown and eradication of fentanyl and its precursors from the pipeline beginning in China and ending in U.S. communities, where the drug has led to the death of hundreds of thousands of people. Trump knows that China can stop this drug trade, and it is likely that little will change in the overall tariff situation — now standing at 54 percent on all Chinese exports to the U.S. — in terms of Trump’s determination to see the flow of fentanyl cease immediately.
Xi needs the U.S. to lift the tariffs, at least back to the pre-April 2 level, because as much as China puts a brave face on it, thousands of Chinese factories are going to go broke.
And Musk would like, but doesn’t necessarily need, not only the Chinese buyer, but the global buyer, to start buying Tesla’s electric vehicles again. In China, he and Tesla are now associated with Trump’s tariffs, as well as ongoing technology sanctions.
Trump, Musk, and Tesla
Tesla, and by extension Musk, are beneficiaries not only of China’s favorable investment policies, but also of its decision to give Tesla the same subsidies as the Chinese government was giving to Chinese EV manufacturers. These subsidies gave Tesla a boost in the market, making Tesla look like an equal player along with Chinese companies. But it also may have compromised Tesla in the long run. Foreign companies in China have long experienced the expectation of a quid pro quo for concessions made during the negotiation stage.
As people around the world watch Trump make major adjustments in global trading and investment arrangements, they also see that the U.S. president has developed a close relationship with Musk, who, in addition to being the world’s richest man, is influential and innovative in his own right.
Trump appointed Musk as titular head of the Department of Government Efficiency, colloquially known as DOGE and not technically a government department. DOGE’s mission, it claims, is to identify and remove fraud, waste, and abuse in federal government spending in the United States.
Protests abound against Musk and Tesla, now both seen as proxies for Trump.
In China, Tesla sales have slacked considerably. Some reports suggest that Chinese consumers are expressing their preference for Chinese EVs, as well as their opposition to Musk, who not so many years ago was hailed by much of the Chinese population as a hero of technology, welcomed wherever he went.
Such was Musk’s profile in China that he was awarded the first approval to build and operate a completely foreign-owned Tesla factory in suburban Shanghai. At the time, China was Tesla’s largest market, and growth seemed limitless.
However, the relationship also suggests that Musk is in a position to act as a bridge to China. Musk’s commitment to Tesla’s Shanghai operation inspired his number two at the company, Tom Zhu, to sleep at the factory during COVID lockdowns, along with the regular workers, as Musk is famous for having done himself in his other factories.
Meanwhile, Trump says he seeks to make the United States far less dependent on other nations for the goods, services, and commodities that the U.S. requires for its own national security. This puts Trump into direct struggle with Xi, who must at least appear to the Chinese people to have the upper hand in keeping the United States obligated to China for such things as rare earth minerals and pharmaceuticals. Trump has no such political worries, as he is term-limited and cannot run for president again, despite chatter to the contrary. He is therefore able to take on China, and the rest of the world, whether or not the immediate consequences of doing so are domestically popular in the United States.
Historical Comparisons
Are there any historical comparisons to the improbable relationship between Trump and Musk?
In 1940, presidential adviser Harry Hopkins was invited to have dinner at the White House. His host (also his boss), then-President Franklin Delano Roosevelt, suggested that he spend the night. He did, and left nearly four years later.
Hopkins was not an elected official. He had gone through a Senate confirmation process when Roosevelt nominated him as secretary of commerce in 1938, but when he resigned and moved into the White House in 1940, his role did not require confirmation.
Hopkins became Roosevelt’s de facto diplomatic envoy to the allies, which included Churchill in the U.K., Stalin in the Soviet Union, and Chiang Kai-shek in China. As the United States grew ever closer to joining the war in Europe, and finally in the Pacific, Hopkins became an indispensable conduit and resource for Roosevelt’s relationships with the U.S. allies, and for the Lend-Lease program that provided military equipment to allies who couldn’t provide it for themselves.
As Roosevelt did, Trump has chosen someone outside of the traditional bureaucracy to spearhead a specific aspect of policy and its implementation. Musk has become a trusted resource in domestic efforts in the United States.
EVs: The Nexus Point
The nexus point that connects these three men together, and which may define and foretell much of their political, personal, reputational, and financial success going forward, is the electric vehicle (EV).
Donald Trump has pledged the autoworkers of the United States that he will bring auto manufacturing back to the United States.
Xi heads a political party and a government that subsidizes its nation’s EV industry, and which is in the process of expanding its own EV manufacturing throughout Southeast and Central Asia, with more to come.
And Elon Musk aims to build Tesla’s dominance in the global EV market.
As we reported and predicted in this space the day before the presidential election on November 5, 2024, Trump will impose any measures that he feels necessary and believes will bolster U.S. defenses against unfair trade practices. His target is not limited to China by any means, as the list of nations affected by the April 2 Executive Order clearly shows.
But it can be argued that the China tariff is the most consequential of all.
Perhaps there is no product other than the EV that most profoundly showcases the competitive advantage an authoritarian one-party state — China — can hold over a capitalist democracy: labor costs.
In a country in which labor cannot genuinely or effectively negotiate for itself, in which the concept of a “union” is a management-directed organization that advances the interests of itself and of the Chinese Communist Party to which it is beholden, the advantage in China is entirely with the companies, with little real room for input or expression from the workforce.
According to ZipRecruiter, the average wage for a United Auto Worker union employee in the United States is $21 per hour. By contrast, a report in 2023 indicated that the hourly wage for a Chinese auto worker ranges between $1.93 and $4.27 per hour.
Automotive expert Laurent Fix said on her YouTube channel on April 4 that “Chinese electric vehicles are going to push Detroit into another bailout unless they pay attention.”
She went on to say, “Trump plans to gut the Inflation Reduction Act and place tariffs on China and other countries if they’re going to import so that will deny them from importing but it doesn’t stop them from building here in the U.S.”
It’s a cogent point, and one that is completely in line with what Trump is telling companies and investors around the world: If you want to avoid the tariffs, build it in the United States. Would Chinese EV companies take up that challenge? And would the United States let them?
