How the US government shutdown affects the world: Visas, trade, tourism

While many think a US government shutdown only affects American citizens and residents, the effects do extend to people across the world. This might sound concerning, but the good news is that shutdowns are usually short-term, and markets tend to recover quickly once funding resumes.

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What is a government shutdown?

The US government “shuts down” when Congress fails to pass the spending bills or a stopgap “continuing resolution” required to fund wide-ranging government services.

Since many agencies do not have legal authority to spend, they are forced into partial closures.

While essential services such as the military, law enforcement and social security continue to function, services deemed “non-essential” come to a stop.

For the rest of the world, here’s a breakdown of what the US government shutdown means.

Waiting for a US visa?

Although visa and passport processing are typically funded through applicant fees, they can still be disrupted during a government shutdown if staffing is reduced or funds become constrained. Students, workers, and tourists awaiting US visas can expect longer waits.

Some routine visa services at US embassies and consulates worldwide could be scaled back or suspended temporarily, with priority given only to emergencies or diplomatic cases.

Data blackout

One of the major concerns during a government shutdown is the data blackout.

As agencies such as the Bureau of Labor Statistics and the Bureau of Economic Analysis grind to a halt, the Fed loses the inflation and jobs data it relies on to guide interest rates.

Markets may be shaky, and this can have repercussions on decision-making for investors worldwide.

Effect on investors

While it bodes well for investors outside the US to keep a sharper eye on market developments during the data blackout, there is a silver lining.

Since US equities make up around 70 percent of global market cap, any tremors on Wall Street are felt across the globe.

However, the strength of the dollar is a more stable criteria to gauge concern. If the dollar weakens, US holdings lose value once converted back into other currencies. If the dollar strengthens, the opposite will be true.

Trade partners worry

The US is a major trading partner for countries. During a government shutdown, negotiations on trade, climate and international agreements often stall.

Slower diplomacy

With the closures of foreign aid programs and embassy services, diplomatic relationships can take a hit based on the severity of the consequences being felt by different countries.

Space exploration on hold

Space exploration is an internationally collaborative effort, but a government shutdown can mean delayed missions for NASA.

A scientist working in collaboration with NASA anywhere in the world, can expect to have their work disrupted.

Tourism affected

As visa processing gets delayed, the ripples are felt by airlines, hotels and travel companies worldwide.

In addition, national parks and museums face closures as they fall under “non-essential” services. This means that tourists already in the US with hopes of visiting landmark destinations on their pre-planned itinerary, might not be able to do so amid the shutdown.

This means, for now, no more trips to the Grand Canyon or the Smithsonian museums in Washington, DC.

Read more:

US government enters shutdown as Congress fails to reach funding deal

Trump says US will ‘probably have a shutdown’

Explainer: Why would the US government shut down?