Welcome back to World Brief, where FP trade reporter Keith Johnson is explaining what U.S. President Donald Trump’s tariff threats could mean for global economic growth.

Also today, we’re looking at the uncertain future of the U.S. Agency for International Development, Panama preparing to sever infrastructure ties with China, and Syria’s efforts to bolster relations with Saudi Arabia.

Risking a Trade War

U.S. President Donald Trump’s trade war, which he declared over the weekend, started with a whimper but could yet end with a bang.

Trump ordered 25 percent tariffs on the country’s top two trade partners, Mexico and Canada (with an exception for Canadian energy and oil, which would be hit with just 10 percent tariffs), coupled with a 10 percent import duty on China, amid threats of tariffs against Europe. On Monday, he backed down from tariff threats on Mexico following a mollifying move from Mexican President Claudia Sheinbaum, who promised to “immediately reinforce the northern border with 10,000 members of the National Guard” to pacify Trump.

Hours later, Trump similarly paused tariffs on Canada for a 30-day period following a call with Canadian Prime Minister Justin Trudeau, during which Trudeau promised to implement a $1.3 billion border security plan and appoint a fentanyl czar to oversee a massive organized crime and drug trafficking directive.

Still, the possibility of a trade war with China remains. That potential blow to the global trading order has rattled markets, economists, ambassadors, freight forwarders, auto assembly plants, farmers, tractor factories, bicycle manufacturers, and pretty much anyone else connected to the world economy.

The upside, such as it is, is that Trump’s tariffs will only lower U.S. economic growth a wee bit as well as raise inflation and unemployment a moderate amount, all while ensuring that U.S. interest rates stay on the high side. The downside is that it will throw a monkey wrench into what economic growth there was in the United States and Europe, as well as undermining any hope of a common front to deal with China’s economic malfeasance, malpractice, and bad behavior.

“There is no reason or logic to tariffs on Canada and Mexico,” said Jorge Guajardo, a former Mexican ambassador to China who specialized in trade issues.

Trump’s future tariffs could turn out to be pure bluster, like most of his previous gambits. Or he may be determined to follow through on at least some of them; he did warn the European Union—an economic bloc that accounts for one-sixth of the global economy and is one of the United States’ staunchest allies both economically and militarily—that tariffs were on the way for it as well.

The risk is that the Monday cease-fire with Mexico and Canada over trade could fizzle out and Trump’s true colors could shine through. Stock markets around the world were down early Monday on his threats, as was consumer confidence.

—Keith Johnson

Today’s Most Read

• The Clash Over Civilizations by Ian Morris
• What Drives Elon Musk? by Cameron Abadi and Adam Tooze
• How Trump’s Tariffs Are Changing Geopolitics by Ravi Agrawal

The World This Week

Tuesday, Feb. 4: Trump hosts Israeli Prime Minister Benjamin Netanyahu at the White House.

Pakistani Prime Minister Shehbaz Sharif begins a five-day trip to China.

Wednesday, Feb. 5: The Indian state of Delhi holds assembly elections.

Thursday, Feb. 6: South African President Cyril Ramaphosa delivers his State of the Nation address.

EU foreign-policy chief Kaja Kallas meets with NATO chief Mark Rutte in Brussels.

Friday, Feb. 7: Turks and Caicos holds a general election.

Saturday, Feb. 8: Rwandan President Paul Kagame and Congolese President Félix Tshisekedi hold an emergency summit.

Sunday, Feb. 9: Lichtenstein holds legislative elections, Kosovo holds parliamentary elections, and Ecuador holds presidential and legislative elections.

German Chancellor Olaf Scholz and opposition leader Friedrich Merz take part in an electoral debate.

Monday, Feb. 10: France begins hosting the two-day Global Summit on Artificial Intelligence.

What We’re Following

The end of USAID? U.S. Secretary of State Marco Rubio said he had been made the acting director of the U.S. Agency for International Development (USAID) while in El Salvador on Monday, confirming that the agency is now under State Department control.

“There are a lot of functions of USAID that are going to continue, that are going to be part of American foreign policy, but it has to be aligned with American foreign policy,” Rubio said.

The move comes amid chaos at the federal international aid agency in recent days as tech billionaire and close presidential advisor Elon Musk and his allies in the newly created Department of Government Efficiency (DOGE) have taken steps to dismantle the agency, laying off hundreds of contractors and reportedly shutting some employees out of the agency’s computer systems and D.C. offices. It also comes on top of Trump’s controversial 90-day freeze on almost all U.S. foreign aid, which he enacted via executive order during his first week in office.

USAID administers billions of dollars in humanitarian, development, and security assistance to more than 100 countries. Its 2023 budget made up just $40 billion, according to this month’s Congressional Research Service report—a fraction of the $1.7 trillion annually allocated to federal spending.

Musk warned during an X Spaces discussion on Monday that the Trump administration is in the process of shutting down USAID. “As we dug into USAID, it became apparent that what we have here is not an apple with a worm in it, but we have actually just a ball of worms,” Musk said.

Democratic lawmakers and some legal experts argue that cutting the agency’s funding and merging it with the State Department is illegal because the agency was created by an act of Congress and, as such, the president must get congressional approval to shut it down. In response, Democratic Sen. Brian Schatz threatened on Monday to place a “blanket hold” on all of Trump’s State Department nominees until USAID is returned to its former status.

Control of the Panama Canal. Panamanian President José Raúl Mulino said on Sunday that he would not renew the country’s memorandum of understanding with China’s Belt and Road Initiative (BRI) in an apparent effort to appease U.S. demands. His decision makes Panama the first Latin American nation to withdraw from China’s infrastructure program.

Rubio traveled to the Central American country this weekend to threaten retaliation if Panama City does not work more closely with Washington. This was Rubio’s first international trip as secretary of state. His warnings centered on recent Chinese investments in the areas surrounding the Panama Canal, which Trump has repeatedly accused of posing a security risk to U.S. trade routes. The “United States cannot, and will not, allow the Chinese Communist Party to continue with its effective and growing control over the Panama Canal area,” Rubio wrote on X.

The Panama Canal is one of the world’s busiest waterways, and the Hong Kong-based Hutchison Port Holdings operates two ports on either side of the canal. Prior to Trump taking office, the U.S. president said he would not rule out military action or economic coercion to seize the canal. However, Mulino said this week that there was “no real threat of retaking the canal or the use of force.”

New friendships. Interim Syrian President Ahmed al-Sharaa flew to Saudi Arabia on Sunday for his first foreign trip since being appointed president last week. While there, he met with Saudi Crown Prince Mohammed bin Salman to discuss rebuilding the war-torn country, increasing bilateral humanitarian and economic cooperation, and lifting international sanctions on Damascus. The trip highlighted Damascus’s shift toward the Arab Gulf states and away from Iran, which backed the ousted Syrian regime of dictator Bashar al-Assad.

On Monday, Sharaa also announced that general elections will likely take place within four to five years, during which his caretaker administration will work to rebuild Syria. Sharaa is set to begin a two-day trip to Turkey on Tuesday to discuss security issues.

Also this week, Syria faced its deadliest attack since Assad’s ouster in December. A car bomb in the northern Syrian city of Manbij killed at least 20 people on Monday, making it the second such attack in just three days. Sharaa’s office has described the incident as a “terror attack” and vowed “the most severe punishment against its perpetrators.” No group has claimed responsibility thus far.

Odds and Ends

Whereas U.S. cinephiles are raving over the musical thriller Emilia Pérez, some viewers in Mexico are far from pleased. Mexico City’s Federal Consumer Protection Agency launched an investigation last Thursday into several complaints that local movie theater chain Cinépolis is not honoring its “Cinépolis guarantee,” which promises to reimburse tickets for viewers who are dissatisfied with the film. In this case, the movie in question is this year’s Golden Globe winner for best musical or comedy.