President Donald Trump says he will not destroy Elon Musk's companies by taking away federal subsidies and that he wants the billionaire tech entrepreneur's businesses to thrive.

The remarks follow a public clash with his former close ally over his tax bill. In July, the space and automotive billionaire announced the formation of a new political party, saying Trump's "big, beautiful" tax bill would bankrupt America.

"Everyone is stating that I will destroy Elon's companies by taking away some, if not all, of the large scale subsidies he receives from the US Government. This is not so!" Trump said in a social media post.

"I want Elon, and all businesses within our Country, to THRIVE."

In a post on X, Musk said the “subsidies” Trump was talking about simply do not exist.

SpaceX won the NASA contracts by doing a better job for less money, he added.

"Moving those contracts to other aerospace companies would leave astronauts stranded and taxpayers on the hook for twice as much!"

The president's social media post came on the heels of Musk's warning to Tesla investors on Wednesday that US government cuts in support for electric vehicle makers could lead to a "few rough quarters" for the company.

Though Musk has often said government subsidies should be eliminated, Tesla has historically benefited from billions of dollars in tax credits and other policy benefits because of its business in clean transportation and renewable energy.

Sweeping tax and budget legislation approved by Congress, and signed by Trump, will halt $7500 tax credits for buying or leasing new electric vehicles on September 30, as well as a $4000 used EV credit, that have helped spur their sales in recent years.

Before the relationship soured, Musk had spent more than a quarter of a billion dollars to help Trump win November's presidential election and led the Department of Government Efficiency's chaotic effort to slash the budget and cut the federal workforce.

The Tesla CEO left the administration in late May to refocus on his tech empire.

Trump and Musk fell out shortly afterward when Musk openly denounced the Republican president's tax-cut and spending bill, leading to threats by Trump to cancel billions of dollars worth of federal government contracts with Musk's companies.

A week after the June spat, the White House reportedly directed the Defense Department and NASA to gather details on billions of dollars in SpaceX contracts to ready possible retaliation against the businessman and his companies.

Musk's SpaceX had been considered a frontrunner to build out Trump's $175-billion Golden Dome missile defence shield and remains a natural choice for key elements of the project.

But sources familiar with the matter said this week that the administration is expanding its search for partners to build Golden Dome as tension with Musk threatens SpaceX's dominance in the program.