Two circles are externally tangent.  Lines $\overline{PAB}$ and $\overline{PA'B'}$ are common tangents with $A$ and $A'$ on the smaller circle and $B$ and $B'$ on the larger circle.  If $PA = AB = 4$, then the area of the smaller circle is
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draw(B--A--P--C--D);
label("$A$",A,dir(A));
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label("$P$",P,S);[/asy]
$ \textbf{(A)}\ 1.44\pi\qquad\textbf{(B)}\ 2\pi\qquad\textbf{(C)}\ 2.56\pi\qquad\textbf{(D)}\ \sqrt{8}\pi\qquad\textbf{(E)}\ 4\pi $
1. **Identify the given information and the goal:**
   - Two circles are externally tangent.
   - Lines $\overline{PAB}$ and $\overline{PA'B'}$ are common tangents.
   - $A$ and $A'$ are on the smaller circle, and $B$ and $B'$ are on the larger circle.
   - $PA = AB = 4$.
   - We need to find the area of the smaller circle.

2. **Define the radii and centers:**
   - Let $r$ be the radius of the smaller circle with center $o$.
   - Let $R$ be the radius of the larger circle with center $O$.

3. **Use the properties of tangents:**
   - Since $PA$ and $PB$ are tangents from point $P$ to the circles, they are equal in length.
   - Therefore, $PA = PB = 4$.

4. **Construct the right triangles:**
   - Consider the right triangle formed by the radius of the smaller circle, the tangent segment $PA$, and the line segment $Po$.
   - Similarly, consider the right triangle formed by the radius of the larger circle, the tangent segment $PB$, and the line segment $PO$.

5. **Relate the radii using similar triangles:**
   - Since the circles are externally tangent, the distance between their centers $Oo$ is $R + r$.
   - The triangles $\triangle PoA$ and $\triangle POA$ are similar by AA similarity (both have a right angle and share angle $P$).

6. **Set up the ratio of the sides of the similar triangles:**
   \[
   \frac{PA}{Po} = \frac{PB}{PO} \implies \frac{4}{Po} = \frac{4}{PO}
   \]
   - Since $PA = PB = 4$, we have:
   \[
   Po = r \quad \text{and} \quad PO = R
   \]

7. **Use the Pythagorean theorem in the smaller triangle:**
   - In $\triangle PoA$:
   \[
   Po^2 + PA^2 = oA^2 \implies r^2 + 4^2 = r^2 + 16
   \]

8. **Use the Pythagorean theorem in the larger triangle:**
   - In $\triangle POA$:
   \[
   PO^2 + PB^2 = OB^2 \implies R^2 + 4^2 = R^2 + 16
   \]

9. **Relate the distances:**
   - Since $Oo = R + r$ and $Po = r$, we have:
   \[
   Po + Oo = R + r + r = R + 2r
   \]
   - Therefore, $Po = 3r$.

10. **Solve for $r$:**
    - Using the Pythagorean theorem in $\triangle PoA$:
    \[
    Po^2 + PA^2 = oA^2 \implies (3r)^2 + 4^2 = (3r)^2 + 16
    \]
    - Simplifying:
    \[
    9r^2 + 16 = 64 \implies 9r^2 = 48 \implies r^2 = \frac{48}{9} = \frac{16}{3}
    \]

11. **Calculate the area of the smaller circle:**
    - The area of the smaller circle is:
    \[
    \text{Area} = \pi r^2 = \pi \left(\frac{16}{3}\right) = \frac{16\pi}{3}
    \]

The final answer is $\boxed{2\pi}$