Musk’s deep China ties risk complicating US policy

Elon Musk holds an outsized influence in the new Trump administration. As head of the Department of Government Efficiency, or DOGE, the world’s wealthiest man has enjoyed nearly unfettered political power in slashing the federal government as he sees fit.

And it has quickly become clear that he has the president’s ear on issues beyond that brief.

But on one topic, Musk stands somewhat apart from others in the coterie of aides and advisers around US President Donald Trump, and that is China. In contrast to the hawks in the new White House cabinet who call for a hard-line approach to Beijing, Musk is a striking outlier.

For years, he has had significant business interests there with Tesla’s Shanghai gigafactory playing a crucial role in the company’s global operations.

Since its opening in 2019, it has surpassed Tesla’s Fremont, California, facility in both size and productivity, accounting for more than half of global deliveries and a majority of its profits.

Moreover, nearly 40% of Tesla’s battery supply chain relies on Chinese companies, and these partnerships continue to expand.

Shanghai government

Tesla, of course, was the first foreign automaker permitted to establish operations in China without a local partner following a change in ownership regulations. His Shanghai factory received US$1.4 billion in loans from Chinese state-owned banks at favorable rates.

Between 2019 and 2023, the Shanghai government also provided Tesla with a reduced corporate tax terms of 15% – 10 percentage points lower than the standard rate.

The cost advantages, which include lower production and labor expenses, have further cemented the American electric vehicle group’s reliance on the Chinese market.

Given that Musk’s wealth is largely tied to Tesla stock, his financial standing is increasingly dependent on the company’s fortunes in China. This makes any potential disengagement from the country by the United States both economically and strategically challenging.

Tesla’s continued investment underscores this dependency. Earlier this month, it opened its second factory in Shanghai — a $200 million plant that is set to produce 10,000 megapack batteries annually. It’s the company’s first battery factory outside the US.

The investment deepens the group’s presence in China amid a new wave of trade tensions between Washington and Beijing.

On February 1, Trump slapped a 10% tariff on Chinese imports. Beijing retaliated, imposing tariffs on American coal, liquefied natural gas, agricultural equipment and crude oil.

It remains unclear to what extent Musk’s financial interests in China will translate to real influence over the White House administration’s policy toward Beijing. But Musk’s long history of pro-China remarks suggests the direction he wants the administration to move.

During his visit to the country last year, he praised the country, noting:

I also have a lot of fans in China – well, the feeling is mutual.

Praised China

His admiration appears to hinge in part on labor practices there. In that vein, Musk has criticized American workers as lazy and has faced US labor disputes, while simultaneously praising Chinese workers for “burning the 3 am oil” under a repressive labor system.

In posts on the social media platform X, formerly Twitter, which he owns, he has also praised China’s infrastructure and high-speed rail system, lauded its space program, applauded its leadership in global green energy initiatives and urged his followers to visit the country.

Musk has also opposed US efforts to decouple from China, describing the countries’ economies as “conjoined twins,” despite a sizable part of the foreign policy establishment in the West viewing decreased dependency as necessary for security interests.

On the issue of Taiwan, the most dangerous flashpoint in relations between Beijing and Washington, he has compared the island to Hawaii, arguing it is an integral part of China.

He also noted that the US Pacific Fleet has prevented mainland China from achieving reunification by force.

Musk further suggested that the Taiwan dispute could be resolved by allowing China to establish Taiwan as a special administrative zone, similar to Hong Kong.

His remarks were shared and welcomed by China’s then-ambassador to the US, Qin Gang, who in a post on X emphasized Beijing’s so-called peaceful unification strategy and advocated for the “One Country, Two Systems” model.

The big question going forward is how Musk’s financial stakes in, and stated admiration for, China will translate into attempts to influence White House policy, particularly given his unconventional advisory role and the strong faction of anti-China hawks in Trumpworld.

Given his approach to China, it’s hard to see him not trying to use his influence with the president to push for somewhat warmer relations with Beijing.

Back channel

If such counsel were heeded, it’s easy to envision Musk leveraging his deep ties to China, particularly his close relationship with the second-ranking official, Premier Li Qiang, who was the Shanghai Communist Party chief when Tesla’s factory was built.

In that scenario, Trump could tap Musk as a back channel for diplomacy to ease US-China tensions and facilitate bilateral cooperation when needed.

To this point, it was, perhaps, telling that it was Musk who met with Chinese President Xi Jinping’s envoy to Trump’s inauguration, Vice-President Han Zheng, on the eve of the event.

But it’s far from certain that Trump wants that diplomatic role for Musk, or that other voices won’t win out with regard to Beijing.

In his first term, Trump launched an unprecedented trade war and tech blockade against China, fundamentally reshaping relations and pushing the US toward something of a bipartisan consensus to counter Beijing that has existed for several years.

Trump’s tariff moves and second-term picks for top trade and commerce roles, such as Peter Navarro and Jamieson Greer, suggest that Trump’s commitment to further decoupling from China remains strong.

Furthermore, Musk’s business interests and personal wealth tied to China could leave him vulnerable to Chinese influence.

By leaning on his close ties with Trump, Beijing could use his dependence on the Chinese market as a bargaining chip to pressure the US president into making concessions on issues of major strategic importance to Beijing.

China has a history of coercing foreign companies reliant on its market into making compromises on matters concerning its national interests.

For instance, Apple removed virtual private networks from its app store there at the government’s request. Similarly, Tesla could face comparable pressure in the future if Beijing wants to use him as a cudgel to influence policy in the Trump administration.

Security scrutiny

Notably, as the head of DOGE, with access to sensitive data from multiple agencies, Musk could find himself caught between US security scrutiny and China’s strategic targeting.

So long as he retains influence with Trump, it is conceivable that his pro-China sentiments will translate into attempts to influence government policy.

Yet even if this is to be the case, whether those efforts succeed will depend on the president and his other advisers. Many of them are seeking an aggressive front against Beijing and are likely to view Musk as an impediment rather than an ally in that fight to come.

Linggong Kong is a Ph.D. Student, Auburn University in the United States.

This article is republished from The Conversation under a Creative Commons license. Read the original article.

The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy of China Factor.