MARKET PERSPECTIVES

By J Mulraj

July 5-11, 2025

Trump must not let ego override sense in his fallout with Musk?

Image created by Bing

There is no denying that America is in a debt trap. A debt trap is when the debtor needs to borrow more money in order  to service the  debt.

The annual interest on USA’s debt of over $36 trillion exceeds $1 trillion. Interest is the largest item of expenditure in its Budget, more than what it spends on defense, social security or Healthcare.

In order to come out of a debt trap, a country must do one or more of these things – increase revenue, cut costs, raise productivity.

Trump is launching tariff wars to try to raise revenue. He is unable or unwilling to cut costs. The US spends nearly $1 trillion on defense, more than the next 9 countries combined. Even when not fighting a war, like the Russia- Ukraine war, or the Israel – Hamas war, it funds them. It shows no propensity to reduce defense expenditure.  Cutting  entitlements like Social security or Healthcare, would not help him win elections, so politicians are loath to try.

Hence, in order to get out of the debt trap, Trump must rely on new technologies to be able to cut costs and to improve productivity.

And this is where Trump must not let his ego override his common sense, in his altercation with Elon Musk. Musk had been critical of Trump’s pet project, the ‘Big Beautiful Bill’, as it will increase US debt instead of decreasing  it. Musk threatened, and, in fact did, launch a political party, the America Party, to try to prevent the BBB from increasing US debt. He will concentrate on just 2-3 Senate and 8-10 House seats to have the ability to block major changes like debt increase. Given the wafer thin margins in both houses held by the Republicans, this ought not to be difficult.

Trump responded to this affront by withdrawing the EV mandate, a Government program which provided subsidies to encourage Electric Vehicles and help phase out ICE (Internal Combustion Engine) vehicles which depend on environmentally unfriendly fossil fuels. Trump and his cohorts also threaten to deport Musk to South Africa!

This is petulant behavior by both! As Ayn Rand said ‘You can ignore reality but you can’t ignore the consequences of ignoring reality’.  

New technologies, if adopted, can provide a cornucopia of resources, at a significantly lower cost, thus ensuring prosperity for nations that adopt them. Some of these have been mentioned in my column of April 25, 2025.

For example, the US can set up an entirely new energy system based on renewable energy sources at a cost of $2 trillion. A combination of Solar, Wind and Batteries, SWB, can provide surplus, reliable, energy, at a cost of 3 cents/kwh, far lower than current costs, varying between 7-42 cents.

Elon Musk’s Tesla provides storage batteries.

Similarly, the cost of mobility will be 4- 10 times lower by using a combination of autonomous vehicles and TASS, or Transport As A Service.

Elon Musk’s Tesla provides both.

The cost of labor will fall hugely, from $28/hour for human labor, now, to $1/hour by 2035 after introduction of humanoid robots.

Elon Musk’s Tesla will provide them.

His companies SpaceX and Starlink lower costs for space exploration and for satellite based telecommunications.

His AI company xAI has the most compute power and Grok, the generative AI chat bot developed by it is arguably the best. AI dominance will be a factor in global leadership, as depicted in the illustration above.

Would the US not lose out to China in so many fields if Trump let’s ego get the better of common sense?

Last week the BSE sensex ended at 78,041.59.   A weekly drop of 4,092 points or 4.98 per cent.

Wars (both military and trade), jingoism and belligerence have created problems for leaders of leading countries. Political rumblings in China, unexpected military losses in Russia, an unseemly and ludicrous spat in America,  war fatigue and ennui in Israel and in  Iran, are creating uncertainties, which stock markets loath. Better to be cautious.

Comments may be sent to jmulraj@asiaconverge.com