Thousands of US federal employees are facing job cuts as President Donald Trump and his top adviser, Elon Musk, push forward with a sweeping downsizing of the government.

The latest round of layoffs is expected to continue on Friday, intensifying concerns among public sector workers.

According to a Reuters report, several government agencies, including the Department of Veterans Affairs, Education, and the Small Business Administration, have already dismissed a significant number of probationary employees—workers hired in the last two years who are easier to terminate.

Data from the federal government indicates that roughly 280,000 of the 2.3 million civilian federal employees fall into this category, the report said.

The Office of Personnel Management (OPM), which oversees federal hiring, has reportedly advised agencies to move forward with dismissing these employees.

Meanwhile, Trump and Musk’s overhaul appears to be expanding.

Musk’s aides were seen arriving at the Internal Revenue Service on Thursday, while US embassies have been told to prepare for workforce reductions.

Trump has repeatedly argued that the federal government is overstaffed and inefficient, pointing to the nation’s $36 trillion debt and last year’s $1.8 trillion budget deficit.

While Republicans in Congress have largely backed the administration’s efforts to cut spending, Democrats have criticized the move, warning that Trump is bypassing the legislature’s authority over federal budgets.

Critics have also expressed concern over Musk’s role in shaping government restructuring, questioning whether the billionaire’s aggressive cost-cutting strategies—similar to those he implemented at Twitter (now X)—are appropriate for the federal workforce.

Beyond probationary employees, layoffs are also hitting those on fixed-term contracts, particularly at the Consumer Financial Protection Bureau (CFPB).

The Trump administration has made clear that it intends to shrink the civil service, citing inefficiencies and bureaucratic resistance to White House policies.

Efforts to encourage voluntary resignations have seen some success, with approximately 75,000 employees—about 3% of the civilian workforce—accepting buyout offers, according to the White House.

Additionally, the administration has proposed deep cuts to foreign aid, sought to strip civil-service protections, and attempted to shut down agencies like the CFPB and the US Agency for International Development.

As the federal government braces for further cuts, employees remain on edge, awaiting the next phase of Trump and Musk’s radical restructuring plan.

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During his US visit, Indian Prime Minister Narendra Modi met with SpaceX and Tesla CEO Elon Musk to explore expanding technological collaboration between India and the United States.

:Prime Minister and Mr. Musk discussed strengthening collaboration between Indian and US entities in innovation, space exploration, artificial intelligence, and sustainable development,” India’s ministry of external affairs said in a release.

“Their discussion also touched on opportunities to deepen cooperation in emerging technologies, entrepreneurship and good governance,” it added.

While no details of the meeting’s agenda were provided, reports indicate that discussions primarily revolved around Tesla’s investment plans and Starlink’s long-pending entry into India.

At a joint press conference following the meeting, US President Donald Trump remarked that he was unsure of the exact purpose behind the meeting but speculated that Musk “wants to do business in India.”

According to an Economic Times report which has cited sources, PM Modi and Musk met to prepare a “bilateral roadmap for enhancing technology partnership”. 

The meeting is understood to have focussed on Tesla’s investment plans for India and Starlink’s entry into the country, besides India’s policies on AI, the report said.

“Musk is understood to have sought lower tariffs on imported EVs, getting an early license for Starlink to offer satellite internet services in India, and expanding SpaceX’s collaboration with ISRO,’ it said.

Starlink’s regulatory battle in India

Starlink, SpaceX’s satellite internet division, has been eager to launch operations in India.

The Indian government has expressed support for assigning spectrum rather than auctioning it, aligning with Musk’s preference.

However, despite this backing, Starlink’s license remains under regulatory scrutiny.

The Telecom Regulatory Authority of India (TRAI) was initially expected to finalize its spectrum allocation guidelines by December 2024, but the process has been delayed, leaving uncertainty over when Starlink can officially launch services in the country.

Domestic telecom providers, including Reliance Jio and Bharti Airtel, have strongly opposed allowing foreign satellite companies like Starlink and Amazon’s Kuiper to enter India without undergoing a spectrum auction, arguing that such a move would put local firms at a disadvantage.

With India’s satellite services market projected to grow at a rate of 36% per year and reach $1.9 billion by 2030, the stakes are high for Starlink as well as other players.

Security concerns after Starlink devices found with smugglers

Starlink’s troubles in India have deepened after its communication devices were discovered in the possession of drug traffickers and insurgents.

In a major operation in the Andaman & Nicobar Islands, authorities seized Starlink terminals used by Myanmar-based smugglers to create Wi-Fi hotspots for navigation.

The Indian Ministry of Home Affairs and the Department of Telecommunications have demanded details on the original buyers of these devices.

However, Starlink has refused to share user information, citing data privacy laws.

A government official confirmed to ET last month that the Ministry of Home Affairs has instructed telecom authorities to take “appropriate steps” to address the issue.

Starlink has been in discussions with the DoT and MHA, seeking clarification regarding the regulatory obstacles it faces while continuing to request permission to operate in India.

The government has indicated that it will not grant Starlink permission to operate in India until it is satisfied with the company’s security measures, including how it plans to address the illegal use of its devices and control data movement.

“Musk is agreeable to give assurances on India security concerns, which includes storing data locally,” one of the sources told Reuters before the meeting.

In addition to the drug smuggling case, Starlink devices have also been found in the hands of insurgents in the northeastern state of conflict-ridden Manipur.

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The US economy faced a dual setback in January, with both retail sales and manufacturing output recording declines.

Retail sales posted their largest drop in nearly two years, while manufacturing production unexpectedly contracted, largely due to a sharp decline in motor vehicle output.

Retail sales fall amid freezing temperatures and tariff concerns

According to the Commerce Department, US retail sales fell 0.9% in January—the biggest decline since March 2023—following a revised 0.7% increase in December.

The drop was broad-based, with sales at auto dealerships plunging 2.8%, clothing stores down 1.2%, and online sales falling 1.9%.

Cold weather and snowstorms across the country played a role in discouraging consumer spending.

Economists also point to rising inflation expectations and uncertainty over new trade tariffs as factors affecting consumer confidence.

A University of Michigan survey last week showed that households believe it may now be too late to avoid the negative impact of new import levies.

A 10% tariff on Chinese goods was implemented this month, while a planned 25% tariff on Mexican and Canadian imports has been delayed until March.

Manufacturing contracts as auto production slumps

US manufacturing production fell 0.1% in January after a downwardly revised 0.5% increase in December, according to Federal Reserve data.

Economists had expected a slight gain.

The decline was largely driven by a steep 5.2% drop in motor vehicle and parts production.

The broader manufacturing sector, which makes up about 10.3% of the economy, had shown signs of recovery in recent months following the Federal Reserve’s interest rate cuts.

However, protectionist trade policies under President Donald Trump, including new tariffs on steel, aluminum, and Chinese imports, have introduced fresh challenges.

Economists warn that disruptions to global supply chains could lead to higher raw material costs, further straining manufacturers.

Economic outlook remains uncertain

Despite weaknesses in retail and manufacturing, other areas of the economy showed resilience.

Utilities output surged 7.2% as demand for heating spiked due to extreme weather conditions. Industrial production as a whole rose 0.5% in January, following a 1.0% increase in December.

Meanwhile, retail spending at restaurants and bars—a key indicator of household financial health—climbed 0.9%, offering a positive signal for consumer demand.

However, the overall decline in retail and factory activity raises concerns about economic growth in the first quarter.

With trade tensions persisting and interest rate policy uncertain, businesses and consumers alike are navigating an increasingly complex economic landscape.

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Brazilian President Luiz Inácio Lula da Silva has hinted at possible retaliatory measures against US President Donald Trump’s newly imposed steel tariffs, marking a significant escalation in trade tensions between the two nations.

Speaking in a radio interview on Friday, Lula criticized the move, stating it would severely impact Brazil’s steel exports to the US.

He suggested that his government file a complaint with the World Trade Organization (WTO) or impose reciprocal tariffs on American products.

The US recently announced a 25% tariff on steel and aluminum imports, triggering widespread reactions across the global trade community.

As one of the largest suppliers of steel to the US, Brazil finds itself at the center of the dispute.

“If they impose tariffs on Brazilian steel, we will respond commercially—either by taking the case to the WTO or by implementing our tariffs on US imports,” Lula stated.

Trade between the US and Brazil is substantial, with total trade volume exceeding $80 billion last year.

Despite periodic disputes, the US maintained a $253 million trade surplus with Brazil.

Lula has emphasized the need to protect Brazilian industry while maintaining strong bilateral ties.

He has also warned that aggressive trade actions from the US will be met with firm responses. “If action is taken against Brazil, there will be reciprocity,” he affirmed.

US tariffs and the ethanol trade dispute

The latest tariffs come amid longstanding US concerns over Brazil’s trade policies, particularly in the ethanol sector.

The US has accused Brazil of imposing unfair tariffs on ethanol imports, adding another layer of complexity to an already tense trade relationship.

Historically, the US has championed free-market policies, but Lula argues that the current administration is deviating from those principles.

Brazil now faces a critical decision: whether to challenge the US at the WTO or introduce countermeasures through its own tariff policies.

Lula has made it clear that while he seeks constructive engagement with the US, Brazil will not hesitate to defend its economic interests.

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US refiners may be forced to find alternative crude oil sources and could face challenges in maintaining optimal refinery operations due to potential tariffs on Canadian and Mexican crude oil, which would significantly limit their options.

The proposed tariffs on Mexican and Canadian energy imports have been delayed until early March, but market uncertainty persists due to President Donald Trump’s plan, according to Vortexa’s senior oil market analyst, Rohit Rathod.

“US Midwest refiners, who rely mainly on Canadian crude via pipeline, might see a reduction in run rates and challenging economics if tariffs are imposed​,” Rathod said in an analysis.

The recently announced 25% steel and aluminum tariffs, which will begin on March 12, have escalated existing uncertainty.

Additionally, tariffs on Mexican crude imports could cut off several US Gulf Coast refiners from heavy grades that are not easily replaced, Rathod said.

What’s at stake?

The import of crude oil from Canada to the US averaged around 4 million barrels per day from January to November 2024, based on EIA data, and this could be significantly affected, according to Vortexa.

The majority of this, 3.7 million barrels a day, is transported over land via pipelines and rail, with the remainder shipped by sea, Rathod said.

Vortexa data for October-December 2024 showed that approximately 170,000 barrels per day of Canadian crude oil were transported from Vancouver to the US West Coast via water.

These barrels, which could be redirected to Northeast Asia if tariffs were imposed, were transported via the TMX pipeline.

Approximately 200,000 barrels per day of crude flows from East Coast Canada could also be affected.

Additionally, 250,000 barrels per day of clean product imports into US PADD 1/Atlantic Coast from EC Canada would need to be redirected as well, according to the analysis.

US Gulf Coast refiners could be scrambling to replace 450,000 barrels per day of seaborne crude oil from Mexico, which is the next biggest flow into the country. If tariffs are put in, Gulf Coast refiners could face challenges to replace this amount.

“The US also imports some ~100kbd of residual fuel from Mexico and another 50kbd from EC Canada which will potentially be impacted,” Rathod said.

Finally there are small volumes of around ~40kbd of clean products that are imported from China which could be impacted.

China tariffs in effect

China responded to US tariffs on Chinese imports, which were implemented on February 4, with counter-tariffs on US energy imports, including crude oil, LNG, and thermal/coking coal.

The Chinese tariffs took effect on February 10th.

“The retaliatory tariffs on US energy imports include 10% and 15% import tariffs on US crude and LNG respectively; however we maintain that the impacts will be minimal given flows constitute 5% or less of China’s total imports and the US originated cargoes can be easily redirected to other destinations in Asia​,” Rathod added.

The primary energy trade between China and the US, LPG, and ethane imports, were not subjected to Chinese tariffs.

Four shipments of US crude are scheduled to arrive in China between mid-February and the end of March, as of February 12, Vortexa reported.

“We understand that buyers will likely look to swap these cargoes with buyers in neighboring countries since tariff exemptions seem unlikely. In the meantime, the barrels could be stored in bonded tanks for future delivery,” Rathod noted.

It is important to note that US ethane and LPG exports to China have not been subject to tariffs, despite the recent bilateral tariffs imposed on other products.

Chinese steam crackers and PDH plants are already operating at weak margins. If China imposes tariffs on these US imports, it would negatively impact them further.

“That said, we certainly have quite some uncertain weeks ahead of us and it is difficult to comment on anything with utmost certainty,” Rathod said.

Trump is expected to announce this week that he is considering reciprocal tariffs on imports from the European Union.

Any tariffs on the European Union could initiate retaliatory tariffs​, with EU leaders holding their own talks to decide the extent of retaliation. All these developments are only fuelling the uncertainty around US energy flows.

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