How the Trump/Musk dispute could influence mortgage rates

Today marked a significant development in the ongoing dialogue between President Trump and Elon Musk, as their relationship appears to have reached a critical point of conflict. The question for those in housing is: How could this impact mortgage rates moving forward?

The 10-year yield saw a slight increase earlier as it reacted to the economic data released today, which resulted in a minor uptick in mortgage rates. However, the 10-year yield has shown no response to the fighting between Musk and Trump (in contrast to what is happening to Tesla stock). After today’s big public fight, we need to look at the influence Musk may have on the proposed tax bill and trade talks — both of which will have implications for mortgage rates in the future. Here are three factors to consider:

Musk has limited Congressional influence

If we consider the possibility that Musk could prevent the tax bill from passing, that might lead to a reduction in Treasury supply to the bond market and potentially improve rates. However, it’s unclear how much influence Musk has over members of Congress. While Musk is undoubtedly a prominent figure, Trump is still the dominant influence over the Republican Party, including Republicans in Congress. It seems unlikely that Musk’s interests would take precedence over those of Trump, so this possibility seems remote.

Musk will put the trade war in the spotlight

Musk stated today that tariffs could potentially lead to a recession. If the trade war gets worse going forward, the White House is likely to avoid engaging in any social media disputes with the owner of X. However, if the trade war takes a turn for the worse and negotiations stall, Musk could influence the situation in ways that may pose challenges for the Trump administration to get what it wants. Less trade disruption could contribute to a more stable environment for mortgage spreads, potentially leading to lower mortgage rates.

Musk can pour money into the midterms

If Musk and Trump don’t reach a resolution, there is another potential scenario we need to consider. With the midterm elections approaching, if the trade tensions escalate, it could provide an opportunity for Musk to support candidates from both the Democratic and Republican parties who oppose tariffs. Gaining sufficient seats in the midterms could empower them to limit the President’s ability to impose tariffs further. This development may have significant implications for the Federal Reserve: some Fed presidents have suggested that if trade agreements are reached, the Fed will return to a more dovish stance and potential interest rate cuts could be on the table. This might be one way Musk can influence mortgage rates in the future.

Conclusion

While these may be speculative theories — and I don’t typically enjoy discussing political economic matters — they are part of our current reality. For the time being, it’s more productive to concentrate on the upcoming Jobs Friday report and what insights the labor market may provide — that holds greater significance for mortgage rates than the ongoing feud.