barclays.co.uk | Updated: 2025-10-03
On 1 October, the US Senate failed to pass a spending bill that would have kept the US government funded.1 For the first time in nearly seven years, federal operations have been significantly curtailed. The shutdown has dominated headlines, with political tensions escalating. President Trump’s rhetoric suggests deeper cuts to federal agencies are likely.
However, markets have remained surprisingly resilient. Historically, the negative impact of government shutdowns tends to be short-lived and reverses once operations resume. That said, the longer the shutdown persists, the more severe its impact is likely to be on economic activity. Equities and currency market volatility have remained muted, with the S&P 500 even reaching all-time highs. Note that past performance is not a reliable guide to future performance.
Meanwhile, the European Union is preparing to double steel import tariffs to 50%, slashing quota volumes by nearly half.2 This move aims to protect domestic producers from cheap Asian imports and aligns with US trade policy, signalling a more coordinated transatlantic stance. Together, these developments reflect a broader shift toward protectionism and fiscal conservatism, with implications for global trade and industrial policy.
