A government shutdown begins after talks break down
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The United States entered its first federal government shutdown in years early Wednesday morning after negotiations between lawmakers and President Trump collapsed. In the final hours before the deadline, both sides appeared more focused on assigning political blame than reaching an agreement.
The deadlock was sealed Tuesday evening when the Senate failed to advance either a Republican proposal—despite three Democrats breaking ranks to vote for it—or a Democratic plan. With no compromise offered, the funding lapse became unavoidable.
The shutdown officially began at 12:01 a.m. ET with the start of the new fiscal year. The last shutdown occurred in 2018–2019, during Trump’s first term, and remains the longest in American history.
Federal agencies are now rolling out contingency plans, with hundreds of thousands of government workers furloughed until the impasse ends.
President Trump at the White House on Tuesday. (AP Photo/Alex Brandon) · ASSOCIATED PRESS
Economic Impact Looms
The economic effects could be felt quickly as government spending halts and federal data releases are paused. The Bureau of Labor Statistics, for example, will suspend nearly all operations, canceling this Friday’s highly anticipated jobs report.
President Trump on Tuesday emphasized that the shutdown could be used as leverage, saying: “We can do things during the shutdown that are irreversible.” He added later that “a lot of good can come down from shutdowns. We can get rid of a lot of things that we didn’t want.”
Beyond the shutdown, markets are also watching new trade measures. Duties of 100% on certain pharmaceutical products and 25% on heavy-duty trucks are set to take effect Wednesday, part of Trump’s tariff agenda aimed at protecting U.S. industries.
Wider Fallout
This week also marked the final workdays for thousands of government employees who accepted buyouts under the Department of Government Efficiency’s “fork in the road” program, further reducing the federal workforce at a sensitive moment.
Investors and analysts are closely tracking both the duration of the shutdown and whether lawmakers can find an off-ramp to end the standoff. Senate leaders have already scheduled additional votes for Wednesday, with the possibility of sessions through the weekend.
A sign at the then-closed National Archives building is seen in December 2018. (ANDREW CABALLERO-REYNOLDS/AFP/Getty Images) ·
What to Expect During the Shutdown
The shutdown’s impact will vary by sector. Government employees, including military personnel, may go without paychecks, though many will still be required to work. TSA officers and air traffic controllers, for instance, will continue staffing airports despite the lack of pay, as seen during the 2018 shutdown when staffing shortages disrupted travel.
Essential benefits such as Social Security and Medicare payments will continue, and mail delivery will remain unaffected since the U.S. Postal Service is self-funded. The Federal Reserve will also continue operating, though its upcoming policy meetings could be complicated by the loss of federal economic data.
House Minority Leader Hakeem Jeffries is joined by fellow House Democrats outside of the Capitol hours before the midnight shutdown deadline. (Kevin Dietsch/Getty Images) · Kevin Dietsch via Getty Images
Tariffs on the Horizon
Wednesday’s tariffs are only the beginning. On October 14, the administration plans to impose additional duties: 10% on softwood lumber and 25% on certain upholstered wooden products, with the possibility of further hikes in January.
Trump has also pledged 100% tariffs on all foreign-made movies and significant tariffs on furniture imports, though details remain unclear. Pharmaceutical companies have been watching closely; Pfizer recently secured a three-year exemption from the new tariffs as part of a broader deal on drug pricing.
Mexico, meanwhile, is monitoring the heavy truck tariffs closely, with the White House yet to clarify how these moves align with the United States-Mexico-Canada Agreement (USMCA).
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