Resistance to Recent DOGE Demand May Indicate Constraints for Elon Musk

By
Joe Killer
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On Monday, a potential standoff may occur between Elon Musk and large portions of the federal government, including leaders appointed by Trump.

The outcome of Musk’s latest demonstration of his harsh management approach — requiring government employees to validate their roles by midnight or face termination — could highlight the boundaries of President Trump’s efforts as a cost-cutter-in-chief.

“For now, please hold off on any response,” a senior Pentagon official advised staff this weekend, noting that the Defense Department “will evaluate this according to its own protocols.” Similar advisories were sent by Tulsi Gabbard, the director of national intelligence; Kash Patel, director of the F.B.I.; the State Department; and others.

Interestingly, many of these agencies are led by Trump loyalists. However, The Times reports that numerous agency heads are “frustrated with justifying the specific nuances of agency policies and scrambling to manage unexpected controversies” initiated by Musk, particularly since the billionaire’s so-called Department of Government Efficiency has gained unprecedented access to government infrastructures.

This raises questions about the limitations of Musk’s strategy. Although he made a similar move at the social media platform formerly known as Twitter, the federal bureaucracy functions at a much slower pace than a private enterprise — and is backed by unions that can resist.

The president of the American Federation of Government Employees, the largest union of its kind, labeled Musk’s correspondence “clearly unlawful,” criticizing that the Office of Personnel and Management was being influenced by “the unelected and irrational Elon Musk.”

The Department of Government Efficiency is losing popularity among voters, according to recent surveys and an increasing number of town halls organized by Republican leaders.

Some G.O.P. governors continue to defend Musk’s initiatives, even while their states are facing financial strain due to stoppages in federal funding and cuts to government jobs.

What action will Trump take? Initially, the president prompted Musk to be more “assertive” and took pride in the extent of the tech mogul’s job reductions. However, he has since remained silent on the issue.

Will he attempt to rein in his most influential ally amid escalating worries that the Musk-directed cuts are jeopardizing the government’s technical expertise, hindering potential advancements in artificial intelligence, threatening job and economic growth, and possibly undermining support for other initiatives, such as comprehensive tax cuts?

Musk appears undeterred, at least publicly: Government employees “now need to engage in meaningful work that holds genuine value for their fellow citizens,” he posted on X on Monday.

Apple has committed to spending $500 billion in the United States over the next four years. The tech giant announced plans to create 20,000 American jobs and produce more goods, including A.I. servers, domestically, shortly after Tim Cook, Apple’s CEO, met with President Trump. The iPhone manufacturer could suffer losses if the president imposes additional tariffs on China: During Trump’s first term, Cook persuaded him to avoid new levies that could impact iPhone sales.

European markets and the euro have risen after German voters elected a new chancellor. Friedrich Merz and his center-right Christian Democrats secured enough support to govern with just one additional coalition partner, as per the latest poll results. However, Merz may face challenges in approving further military expenditure, potentially upsetting President Trump. (The hard-right Alternative for Germany, which Musk has supported, slightly underperformed but remains the largest opposition party.)

Investors are preparing for Nvidia’s earnings report and new inflation data this week. The chipmaker, central to the A.I. explosion, will announce its results on Wednesday, a significant event for this quarter’s earnings report. On Friday, the Personal Consumption Expenditures report, the Fed’s preferred measure of inflation, will be released amid concerns that increasing consumer prices could compel the central bank to maintain a prolonged pause on interest rates.

As the Russia-Ukraine conflict reaches its fourth year on Monday, the Trump administration and Kyiv are engaged in tense discussions that could involve trading Ukraine’s mineral resources for ongoing American backing.

Such an arrangement could represent a major shift in policy, granting the United States prime access to Ukraine’s extensive deposits of titanium, lithium, and rare earth elements. President Volodymyr Zelensky and his administration have indicated a degree of openness — though they are pushing back with limited influence, as Washington is preparing to launch peace talks with Moscow, so far without their participation.

Ukraine has labeled Washington’s latest proposals too demanding. Zelensky, who has been at odds with President Trump since his apparent shift toward Russia, heightened the stakes on Sunday by suggesting he would consider relinquishing power in exchange for enhanced security guarantees, including NATO admission.

What’s at risk: Washington seeks half of Ukraine’s revenues from natural resource exports, along with a share of earnings from ports and other infrastructures. This revenue would be directed into a fund capped at $500 billion. Ukraine believes it should contribute no more than $90 billion, Bloomberg has reported.

Treasury Secretary Scott Bessent, who visited Ukraine earlier this month, has been vigorously advocating the plan. “The terms of this partnership will mobilize American skills, capital, and high standards of governance to hasten Ukraine’s recovery while sending a strong message to Russia that the U.S. is committed to a free and thriving Ukraine in the long run,” he stated in The Financial Times this weekend.

Trump’s hard-nosed stance indicates a more mercantilist strategy toward Ukraine, which could complicate efforts to restore the nation.

Last year, the World Bank estimated the cost of reconstruction and recovery at $486 billion, with Kyiv indebted to foreign nations and the I.M.F. for further billions. The largest creditor remains the European Union, which has provided billions in grants and loans, including a €50 billion rebuilding fund.

Lobbyists are making a last-minute effort to maintain a small but essential trade rule that the Trump administration attempted to eliminate earlier this month with disastrous consequences.

As part of a broader tariff strategy, President Trump intends to abolish the de minimis exemption, which allows goods valued under $800 to enter the country tax-free.

This is viewed as crucial for stopping fentanyl from entering the U.S., and it enjoys bipartisan backing — yet its elimination is expected to face resistance from corporate America, as Grady McGregor reports for DealBook.

Business concerns: Eliminating the exemption, which China has skillfully exploited, could be costly for companies like Amazon and FedEx. Economists also fear it could reignite inflation and disproportionately impact low-income households.

Corporations and their advocates plan to argue that thousands of additional Customs and Border Protection officers and substantial investments would be required to monitor de minimis shipments — and that there are more cost-effective technological solutions to combat fentanyl trafficking.

Trump’s disruptive approach: The president repealed the de minimis exemption for goods from China earlier this month only to reverse his decision a few days later.

Representative Rosa DeLauro, a Democrat from Connecticut and a strong critic of the de minimis provision, remarked that the abrupt shift has “left us all with severe whiplash.” Trump modified the order following a meeting with Fred Smith, Chairman of FedEx, leading DeLauro to question whether the logistics company had influenced the president to suspend the issue.

In response to inquiries from DealBook regarding its lobbying efforts on de minimis, FedEx stated that it “advocates for pro-trade policies that facilitate global trade and commerce.”

Opposition to de minimis remains strong. Trade hardliners, such as Peter Navarro, a key Trump advisor, have long criticized the provision as a loophole allowing drugs to freely enter the U.S.

“It’s finished,” remarked William Reinsch, a former U.S. trade official and a senior adviser at the Center for Strategic and International Studies, to DealBook.

The U.S. is currently experiencing a de minimis surge. In 2024, 1.36 billion de minimis packages entered the U.S., with nearly half originating from China — a nearly tenfold increase over the past decade.

Investors and companies are preparing for its potential repeal. It would significantly impact the Chinese e-commerce giant Shein, which is considering a London I.P.O. and reportedly facing pressure to either significantly reduce its valuation or delay the listing. Other businesses are looking to shift production away from China. Amazon’s comparable venture, Amazon Haul, is also poised to suffer losses.

It’s true that Berkshire Hathaway reported a significant increase in operating earnings for 2024. However, for investors, the pressing question remains: What is Warren Buffett’s strategy regarding his increasingly dormant “elephant gun” cash reserve?

His conglomerate has accrued $334 billion in cash and Treasury bills, surpassing the market capitalization of Coca-Cola. And while Buffett continued to commend stocks, he’s no closer to finalizing another substantial deal.

“Berkshire will never favor holding cash-equivalent assets over owning quality businesses,” Buffett expressed in his annual letter to shareholders on Saturday. He emphasized that the value of the conglomerate’s investments in companies greatly exceeds that of his equity portfolio.

Nonetheless, this doesn’t alter the reality that the Oracle of Omaha liquidated numerous stocks in 2024, including shares in Apple and Bank of America, during a year that was otherwise booming for the markets.

What might persuade Buffett to venture into a significant deal? This year, he refrained from mentioning “elephant gun” in his letter whatsoever. Last year, he acknowledged that there are only a handful of companies that could significantly impact Berkshire’s bottom line, implying that the era of transformative acquisitions for the firm has likely ended.

The expanding cash reserve may not indicate that Buffett is bracing for economic turmoil, with some Berkshire analysts suggesting that the billionaire is preparing a route for his eventual successor as CEO, Greg Abel.

Buffett noted that Berkshire’s stash of short-term Treasuries — numbering $286 billion as of December 31 — had yielded a “predictable substantial gain in investment income.”

However, Buffett is preparing for potential challenges. The billionaire warned that extreme weather events, such as wildfires, could adversely affect Berkshire’s extensive insurance enterprises.

More concerningly, he hinted at the possibility of decisions from Washington negatively impacting investors, especially as inflation and deficit hawks closely scrutinize President Trump’s anticipated strategies.

“Paper currency can lose its value if fiscal irresponsibility prevails,” he cautioned to investors. “Fixed-coupon bonds offer no safeguard against soaring currency.”

Deals

  • Shares in Just Eat Takeaway.com surged on Monday after Prosus, a major tech investor, agreed to acquire the food delivery service for $4.3 billion in cash. (CNBC)

  • FTI Consulting is preparing for a staff exodus as the firm deals with the repercussions from a significant star’s departure. (FT)

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