US Government Shutdown: Economic and Political Implications

In the early hours of October 1st, the US government began a federal shutdown after Congress and President Donald Trump failed to reach a budget agreement.

The Senate votes on the evening of September 30th were unsuccessful: neither party's bill received enough votes to pass. A deadlock scenario became a reality as the clock ticked into the new fiscal year.

This is the first time since the 2018-2019 crisis that the United States has witnessed a government shutdown. That shutdown lasted 35 days, setting a national record.

Hundreds of thousands of federal employees were affected.

As soon as the budget ceased to take effect, federal agencies simultaneously implemented emergency response plans. More than 400,000 employees were forced to take unpaid leave, while others, including security forces and the military, continued to work without temporary compensation.

At the airport, security and air traffic control personnel must continue their duties, but the risk of spontaneous absences, as happened in 2019, could disrupt flight operations. Conversely, services such as postal services and Medicare and Social Security payments continue to operate due to their own financial mechanisms.

Economic data has stalled.

One of the direct impacts of the US government shutdown is the disruption of economic data. The Bureau of Labor Statistics (BLS) – the agency responsible for publishing the monthly jobs report – will cease all operations, reducing its staff from 2,000 to just one. Similarly, the Department of Commerce will also suspend work at the Census Bureau and the Bureau of Economic Analysis.

This leaves financial markets, investors, and even the Federal Reserve (Fed) lacking crucial data for decision-making, especially with the interest rate meeting scheduled for the end of October.

The political risk is increasing.

Amidst the budget impasse, the White House has also left open the possibility of large-scale staff cuts, further increasing concerns about instability. President Trump has repeatedly mentioned the possibility of mass layoffs, although specific plans remain unclear.

Lawmakers from both parties are trying to blame each other for the paralysis, turning the budget crisis into a "political chess game." Observers predict that voting may continue through the weekend, but the possibility of reaching a short-term agreement remains open.

New tariffs: a double shock for the economy.

In addition to the budget crisis, the US economy is also facing a series of new tariff policies from President Trump. Just today, the administration announced a 100% tariff on patented pharmaceuticals, with several controversial exceptions. Pfizer was granted a three-year grace period in an agreement aimed at lowering drug prices.

At the same time, the US will impose a 25% tariff on heavy trucks to “protect domestic manufacturing,” which is of particular concern to Mexico due to its connection with the USMCA agreement. Following this, on October 14th, new tariffs will be applied to timber and certain furniture products, with the possibility of a significant increase early next year.

Promises to impose 100% tariffs on foreign films or imported furniture have also been made, but no specific timeline has been given. This could be a double shock for the US economy: facing the risk of stagnation due to the government shutdown, and bearing the added risk of a trade war.