Trump Threat To Pull Musk Contracts Imperils US Space Ambitions

Elon Musk and Donald Trump’s dramatic spat on Thursday has gone beyond online vitriol to real-life repercussions: threatening to cut off a vital part of the US space program.

Musk said he will decommission SpaceX’s Dragon spacecraft, which ferries cargo and people to the International Space Station for the US. SpaceX, the world’s most prolific rocket launcher, also holds billions of dollars in contracts to loft critical national security satellites for the Pentagon and develop a spacecraft to put American astronauts on the moon in as little as two years.  

The decision was prompted by Trump’s threat to tear up all federal contracts with Musk, which risks a crucial revenue source for SpaceX. It was the latest in a tit-for-tat exchange between the two men after Musk officially exited his role in the US government and railed on two of Trump’s most important pillars of his presidency: his tax bill and tariffs.

While Musk dumped on Trump on X, his social media site, the president hit back in a Oval Office meeting with the German chancellor and a series of posts on his own site, Truth Social. 

The question now is whether either of the men will follow through with their threats. 

“No contracts for SpaceX would have a huge domino effect across a lot of critical functions of the US government that rely on space, and that’s most closely centered around the Pentagon and NASA,” said Clayton Swope, senior fellow at the Center for Strategic and International Studies. “There’s really no one else that could fill SpaceX’s shoes right now.”

SpaceX, one of the world’s most valuable startups with a market value of $350 billion, has received more than $22 billion in unclassified contracts from the Defense Department and NASA since 2000.

To put US astronauts on the moon, NASA awarded SpaceX roughly $4 billion. NASA’s reliance on the Dragon spacecraft for ISS missions has been recently deepened by Boeing Co.’s Starliner setbacks. SpaceX also has a contract worth $843 million to decommission the orbiting research laboratory at the end of the decade. 

Musk said earlier this week that SpaceX made about $1.1 billion through its work with NASA in 2025 alone.  

“NASA will continue to execute upon the President’s vision for the future of space. We will continue to work with our industry partners to ensure the President’s objectives in space are met,” NASA spokesperson Bethany Stevens said.  

A SpaceX representative didn’t immediately respond to a request for comment.

SpaceX’s Starlink satellite internet unit, which delivers broadband to rural areas and holds contracts with the Pentagon, may also be at risk.

“Musk has launched more satellites than the rest of everybody in the world combined,” said Peter Hays, professorial lecturer at George Washington University’s Space Policy Institute. “It would not be easy to just say, ‘Well, we don’t like you anymore. We’re not going to do anything with you.’”

SpaceX, along with Boeing and Lockheed Martin Corp.’s United Launch Alliance and, in the future, Blue Origin, is critical for launching US national security missions including surveillance satellites for the Pentagon.

 But Blue Origin only recently debuted its New Glenn rocket and ULA is struggling to ramp up launches, making the Space Force and the National Reconnaissance Office critically dependent on SpaceX.

“They can’t really cut off SpaceX without having a severe impact on the military space capabilities,” said Todd Harrison, a senior fellow at the American Enterprise Institute.

The rupture between Trump and Musk could ripple across the president’s signature Golden Dome missile defense system, Harrison said. If the administration opts for a system that is less reliant on space, there could be fewer contracts for SpaceX to bid on. “This feud could actually manifest itself in the architecture that Golden Dome ends up choosing.”

Legal Authority 

It’s unclear whether Trump can simply tear up contracts and unilaterally revoke subsidies.

“It’s clearly illegal to cancel a government contract because the president has a political disagreement with the CEO of a company,” Harrison said.

Politics is not supposed to play a role in contract awards or termination, and if the president were to follow through on his comments, SpaceX could sue for breach of contract, he said. Even if the administration attempted to terminate the contract through conventional means, “now that the president has mused about this publicly, it would still be grounds to challenge the termination.”

Canceling government contracts can be a costly and politically fraught maneuver. Most federal contracts include a clause allowing “termination for convenience,” but doing so often requires the government to reimburse contractors for billions in sunk or stranded costs.

What’s more, only designated contracting officers — not the president — have the authority to sign or cancel federal contracts.

“It’s not a matter of flipping a switch. There are processes that you have to go through to cancel contracts based on the termination clauses and termination responsibilities,” said Caryn Schenewerk, a space industry consultant and law professor at Georgetown University who previously worked for SpaceX.

If the federal government fails to handle the cancellation appropriately, it could open up the government to even more lawsuits with one of the most litigious chief executives in the country. In 2014, Musk sued the Air Force to allow SpaceX to compete for launching national security satellites. SpaceX dropped the lawsuit when the Air Force abandoned its noncompete award to ULA and opened it up to competition.

“SpaceX will rightly go to battle against cancellations,” Schenewerk said.