Elon Musk's $3.5 trillion SpaceX-Tesla merger could face a China-shaped national security hurdle in Washington and Beijing

SpaceX depends heavily on sensitive US defence contracts, among them the Starshield military satellite programme, while Tesla is deeply tied to Chinese manufacturing. Beijing requires that Tesla store self-driving user data within China's borders. One proposed solution would ring-fence Tesla's Chinese operations from the rest of the merged entity. Daniel Kollar of Intralink Group noted that Airbus and Honeywell already manage defence work while maintaining operations in China.

Musk's public backing of the deal reportedly created a 'mess' that could delay talks.

Tesla cut its sales goal to 5 million cars a year by 2030, down from 20 million.

Tesla shares have dropped 14pc this year while the S&P 500 has gained 13pc.