The US government was forced into a shutdown on October 01 after Congress failed to agree upon the funding bill. The major area of difference was the extension of healthcare subsidy, which Trump has been totally opposed to. The shutdown means; non-essential service workers will be put on furlough (work without pay). Only critical services like air traffic control, homeland security, and health services will continue. These kinds of shutdowns have now become very common in the US in recent years

The immediate impact of the shutdown will be that many of the non-essential services come to a standstill. This will include visa processing, trade talks, and several topics where India is interested. But the bigger impact will be on the purchasing power of furloughed hands. In the past, where retrospective wages were paid, the consumption still lagged. The bigger risk is the impact on US GDP growth. Past experience is that 1 week of shutdown shaves off 0.1% from GDP, so 4 weeks would knock off 40 bps from the GDP. That would have larger import for domestic and for global demand. 

If one were to go by the statements made by President Trump after the shutdown, there are some interesting trends emerging. Trump has hinted that the shutdown may be a precursor to permanently remove many of the state sponsored workers to reduce the flab in government spending. His bet is that if the shutdown continues for  longer, a number of government staff may choose to voluntarily resign. The other thing it will achieve is a delay in decisions with respect to tariffs and visas. These are both bargaining chips that Trump has been driving hard against most of the countries they do business with. What could be implications of such a move?  

If this is the agenda that the US is trying to pursue, it may have to think again. Firstly, a large scale cut in staff of the US government raises serious security and operational concerns. Also, such a move is likely to raise serious public interest litigations by the aggrieved. It is doubtful if such a move can stand in a court of law in the US. Regarding the restrictions on trade and visas, nations will cooperate up to a point. Beyond that, they will just prefer to look at the alternatives. India signing up with EFTA is a classic case in point. In a world full of hungry businesses, a high-handed approach can only work for some time. Eventually, it will simply backfire!