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Trump is at it again with threats to shut down the government as budget deadline looms

US President Donald Trump has threatened to shut down the government if Congress fails to fund a planned border wall with Mexico, setting the stage for a volatile month of negotiations ahead of the 30 September budget deadline.

Trump Faces Potential Resistance by Threatening a Government Shutdown

The president wants the next budget to include appropriations of at least $1.6 billion to fund the initial stages of a border wall with Mexico. The House of Representatives passed border security appropriations last month that included a $1.6 billion down payment on a new wall. However, the Senate will only be able to approve it with bipartisan votes.[1] This is where Trump will run into resistance, and why he has resorted to threatening a complete shutdown of government.

Congress will have about 12 working days to approve a new budget and raise the debt ceiling before the Treasury runs out of options to maintain all of its government obligations. A failure to raise the ceiling will have “potentially negative implications” on U.S. sovereign debt, according to credit rating agency Fitch Ratings.[2]

Trump Divides the Country

Trump’s border wall proposal has divided the country, with Democrats insisting they won’t support the measure. At the same time, many Republican voters say it is the only way to put a stop to illegal immigration. Various estimates show that there are more than 11 million illegal migrants living in the United States.[3]

Uncertainty over the budget triggered another bout of risk aversion in the financial markets this week. U.S. stocks declined in mid-week trading as volatility rose. The decline followed the Dow’s biggest one-day advance in nearly four months.[4]

What’s Expected of Markets? 

Stock markets are likely to remain on edge as investors return from summer holidays. September is a notoriously difficult month for Wall Street, and the added political risks could trigger renewed bouts of anxiety.

The Trump administration has several other legislative reforms on the go, including an elaborate plan to reform the tax code and rewrite the North American Free Trade Agreement (NAFTA). Round one of NAFTA talks concluded last week and are set to resume early next month in Mexico.

[1] Alexis Simendinger (24 August 2017). “Trump’s Two Faces: Uniter, Divider.” Real Clear Politics.

[2] Kimberly Chin (23 August 2017). “Wall Street falls as Trump Threatens government shutdown.” Reuters.

[3] PEW Research Center (27 April 2017). “5 facts about illegal immigration in the U.S.”

[4] Wallace Witkowski and Ryan Vlastelica (22 August 2017). “Dow posts biggest one-day gain in nearly four months.”

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