Crypto News: Rocky road ahead for US allies

Welcome to Balance of Power, bringing you the latest in global politics. If you haven't yet, sign up here.

Day One of Donald Trump's second term as US president made clear to many of America's friends that they face a rocky road ahead.

He threatened tariffs of up to 25% by Feb. 1 on neighboring Mexico and Canada, both fellow signatories of the USMCA trade pact negotiated during his first term. He accused them of doing too little to stop drugs and migrants flowing into the US, calling Canada "a very bad abuser."

LISTEN: On today's Big Take podcast, Washington bureau chief Peggy Collins joins host Sarah Holder to discuss what Trump's first remarks say about his priorities for the next four years.

Mexico was hit on multiple fronts through Trump's various moves to crack down on undocumented migrants. He even ordered the Gulf of Mexico to be renamed the Gulf of America.

The president set in motion US withdrawal from the World Health Organization and the Paris climate agreement, while the European Union was instructed that it should "quickly" buy more US oil and gas if it wants to avoid tariffs.

China, on the other hand, escaped sanction, for now.

The immediate challenge for US allies, particularly in Europe, is how to navigate relations with the leader of the free world if expectations of shared values and outlook are replaced by "America First" policies and abrasive rhetoric.

Squeezed between US economic nationalism and the military threat posed by an aggressive Russia, Europe desperately needs leadership to assert its interests. But Germany's economic struggles going into snap elections and the political turmoil in France have muted the voices of its two biggest powers.

Trump has often expressed admiration for Russian President Vladimir Putin, who's eager for talks on a deal to end his war in Ukraine. Europe's leaders risk having the continent's future security decided over their heads.

Like Canada and Mexico, they must now reckon with a US president who has no qualms wielding power against longstanding allies, and whose interests may no longer align with theirs.— Tony Halpin

WATCH: Trump announcing his plan to enact the tariffs.

Global Must Reads

Trump notified the United Nations that he's again withdrawing the US from the landmark Paris Agreement, a retreat in the global fight against climate change at a time when the world is recording record annual temperatures. The measure was part of a sweeping overhaul of US energy policy that pulled back from clean power and put the weight of the federal government behind fossil-fuel production.

A year since he addressed global elites in Davos as Argentina's libertarian new president, Javier Milei is back with results to show from his economic experiment. The inflation rate has plunged, the government posted a budget surplus, and the economy has begun to pull out of recession — but arguably more importantly for his success, Milei's support is holding up even as his cuts squeeze voters.

Italian Prime Minister Giorgia Meloni, Milei and Chinese Vice President Han Zheng at Trump's inauguration. Photographer: Shawn Thew/EPA

Germany's election campaign will take a detour to Davos today, when Social Democratic Chancellor Olaf Scholz and his main rival, Christian Democrat Friedrich Merz, showcase their competing visions for how to revive Europe's biggest economy. Not present at the Swiss resort will be representatives of the Trump-friendly Alternative for Germany party that is polling in second place, behind Merz's CDU-led bloc and ahead of Scholz's SPD.

Keir Starmer's government is preparing to approve controversial expansions to three London airports as part of a push to spur growth amid doubt over the credibility of the UK's economic plans. Ministers are set to publicly signal support for a long-sought third runway at Heathrow, sources say.

Passengers at London Heathrow Airport. Photographer: Julia Manns/Bloomberg

India's government is prepared to work with the Trump administration to identify and take back all its citizens residing illegally in the US, sources say. In return, India hopes that the new administration would protect legal immigration channels used by its people, in particular student visas and the H-1B program for skilled workers.

The UK will start a public inquiry into the murders last year of three young girls in northwest England after the prime minister said the state had failed to protect them.

Turkish authorities have opened an investigation into Istanbul Mayor Ekrem İmamoğlu, one of President Recep Tayyip Erdoğan's biggest political rivals, while another opposition leader was detained on charges of insulting him, further intensifying the legal pressure on dissenting figures.

Philippine authorities arrested a Chinese national and two Filipino cohorts for alleged espionage, a case that risks further stoking bilateral tensions.

Sign up for the Washington Edition newsletter for news from the US capital and watch Balance of Power at 1 and 5 p.m. ET weekdays on Bloomberg Television.

Chart of the Day

UK Chancellor of the Exchequer Rachel Reeves will struggle to convince the City of her fiscal credibility if she announces more delayed spending restraint, having already sought to move politically controversial decisions toward the end of Labour's parliamentary term. Reeves is in danger of breaking her self-imposed fiscal rules, by which official forecasts must show the UK on track to cover day-to-day government spending with tax revenues by 2029-30.

And Finally

Billionaire-backed ArcelorMittal's plans to shut down a century-old steel mill in South Africa are holding President Cyril Ramaphosa's dream of fostering a $257 billion infrastructure boom to ransom. That plant — and two others it wants to idle — supply what builders need for the vaunted exponential rollout of power-transmission towers, rail lines and new roads — projects that Ramaphosa says will turn the country into "a construction site," boost sluggish growth and provide much-needed employment.