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The United States government is, once again, on course to shut down. 

In just a few hours, when the clock strikes a minute past midnight, the state will likely be unable to pay its bills.

What happens?

It means all non-essential federal services are frozen. Government, military, waster disposal and air traffic control staff are unlikely to be paid. Federal agencies, national parks, federal courts, museums and a plethora of state bodies will be hit.

They simply won’t have the funding to have meet their wage and other bills.

Lawmakers, however, will continue to be paid, thanks to provision in the US constitution.

Why is this happening?

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Congress, encompassing the US Senate and House of Representatives, have yet to approve discretionary spending, a necessity for the new US financial year, which starts on 1 October.

Republican House Speaker Kevin McCarthy has not succeeded at getting hard right wing Republicans to agree a deal. If he pushes too hard, or gets a bill passed that the right flank of his party don’t like, he risks losing his job.

Mr McCarthy’s job is predicated on not upsetting that far right cohort. In order to secure his job as speaker he agreed that any House of Representatives member could call for a vote to oust him.

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In a way he’s backed himself in to a corner, promising something he couldn’t deliver: to return federal spending to pre-COVID levels. Many Republicans loath the trillions spent on health measures and economic stimulus.

While he secured a deal to lift the debt ceiling with President Joe Biden back in May to avert the US being unable to meet debt repayments, this is a different situation.

There aren’t the same catastrophic economic consequences hanging over a government shutdown and so there’s less of a threat to Mr McCarthy.

Had the US defaulted it would have been first time in the country’s history and would have led to a near total shutdown of the economy. There would have been severe consequences to the worldwide economy.

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House Speaker Kevin McCarthy says he is directing committees to open a formal investigation into a ‘culture of corruption’ around Joe Biden

When has it happened before?

Many times. In the last decade alone there have been four shutdowns over topics such as Obamacare and Trump’s border wall. This one is harder to tie to a specific event.

Most recently, in 2018, Democratic politicians refused to pass a Trump-led spending plan to fund his disputed southern border wall. The shutdown then lasted 35 days.

Numerous government organisations have manuals for furloughing staff in the event of a shutdown.

What are the consequences/effects?

Last time roughly 800,000 workers were furloughed but exact numbers for a 2023 repeat are unclear.

As the first day of the shutdown would be Sunday, the effects will not be immediate as many employees won’t be due at work.

When people activity falter so too does production.

The Congressional Budget Office (CBO) estimated that the five-week Trump shutdown in 2018-2019 reduced economic output by $11bn, including $3bn that the US economy never regained.

Shutdowns also impact America’s reputation as a stable, functioning financial leader, and it had an influence on government spending plans, delaying legislative agendas.

Some consequences are less quantifiable.

The US’s credit rating was already downgraded after just months of debt limit debate that brought the country to the brink of default.

Fitch brought down the rating from AAA – the highest possible – to AA+ over debt and governance concerns.

Lower credit ratings can increase the cost of government borrowing, adding to taxpayer bills, reducing spending and shrinking the economy.

US officials criticised the move, with Treasury Secretary Janet Yellen calling it “arbitrary” and “based on outdated data”.

Another credit agency, Moody’s, said a shutdown would threaten the triple A credit rating it designated for the US.

What are the odds of this happening?

It’s highly likely. Hard-line Republicans in the House of Representatives voted down a long-shot bill proposed by Mr McCarthy to halt the shutdown.

The Senate, which would need to vote to approve any plan, is not scheduled to take a final vote until Sunday despite the final deadline being midnight on Saturday.

How long will it go on for?

No one knows.

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Donald Trump announces 30% tariff on imports from EU

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Donald Trump announces 30% tariff on imports from EU

Donald Trump has announced he will impose a 30% tariff on imports from the European Union from 1 August.

The tariffs could make everything from French cheese and Italian leather goods to German electronics and Spanish pharmaceuticals more expensive in the US.

Mr Trump has also imposed a 30% tariff on goods from Mexico, according to a post from his Truth Social account.

Announcing the moves in separate letters on the account, the president said the US trade deficit was a national security threat.

In his letter to the EU, he wrote: “We have had years to discuss our trading relationship with The European Union, and we have concluded we must move away from these long-term, large, and persistent, trade Deficits, engendered by your tariff, and non-Tariff, policies, and trade barriers.

“Our relationship has been, unfortunately, far from reciprocal.”

In his letter to Mexico, Mr Trump said he did not think the country had done enough to stop the US from turning into a “narco-trafficking playground”.

The president of the European Commission, Ursula von der Leyen, said today that the EU could adopt “proportionate countermeasures” if the US proceeds with imposing the 30% tariff.

Ms von der Leyen, who heads the EU’s executive arm, said in a statement that the bloc remained ready “to continue working towards an agreement by Aug 1”.

“Few economies in the world match the European Union’s level of openness and adherence to fair trading practices,” she continued.

“We will take all necessary steps to safeguard EU interests, including the adoption of proportionate countermeasures if required.”

Ms von der Leyen has also said imposing tariffs on EU exports would “disrupt essential transatlantic supply chains”.

Meanwhile, Dutch Prime Minister Dick Schoof said on the X social media platform that Mr Trump’s announcement was “very concerning and not the way forward”.

He added: “The European Commission can count on our full support. As the EU we must remain united and resolute in pursuing an outcome with the United States that is mutually beneficial.”

Mexico’s economy ministry said a bilateral working group aims to reach an alternative to the 30% US tariffs before they are due to take effect.

The country was informed by the US that it would receive a letter about the tariffs, the ministry’s statement said, adding that Mexico was negotiating.

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How ‘liberation day’ unfolded

Trump’s tariff threats and delays

On his so-called “liberation day” in April, Mr Trump unleashed “reciprocal tariffs” on many of America’s trade partners.

The US president said he was targeting countries with which America has a trade imbalance.

However, since then he’s backed down in a spiralling tit-for-tat tariff face-off with China, and struck a deal with the UK.

The US imposed a 20% tariff on imported goods from the EU in April but it was later paused and the bloc has since been paying a baseline tariff of 10% on goods it exports to the US.

In May, while the US and EU where holding trade negotiations, Mr Trump threated to impose a 50% tariff on the bloc as talks didn’t progress as he would have liked.

However, he later announced he was delaying the imposition of that tariff while negotiations over a trade deal took place.

As of earlier this week, the EU’s executive commission, which handles trade issues for the bloc’s 27-member nations, said its leaders were still hoping to strike a trade deal with the Trump administration.

Without one, the EU said it was prepared to retaliate with tariffs on hundreds of American products, ranging from beef and auto parts to beer and Boeing airplanes.

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Donald Trump plans to hit Canada with new tariff – while warning of blanket hike for other countries

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Donald Trump plans to hit Canada with new tariff - while warning of blanket hike for other countries

Donald Trump has said he plans to hit Canada with a 35% tariff on imported goods, as he warned of a blanket 15 or 20% hike for most other countries.

In a letter to Canadian Prime Minister Mark Carney, the US president wrote: “I must mention that the flow of Fentanyl is hardly the only challenge we have with Canada, which has many Tariff, and Non-Tariff, Policies and Trade Barriers.”

Mr Trump’s tariffs were allegedly an effort to get Canada to crack down on fentanyl smuggling, and the US president has expressed frustration with Canada’s trade deficit with the US.

In a statement Mr Carney said: “Throughout the current trade negotiations with the United States, the Canadian government has steadfastly defended our workers and businesses. We will continue to do so as we work towards the revised deadline of August 1.”

He added: “Canada has made vital progress to stop the scourge of fentanyl in North America. We are committed to continuing to work with the United States to save lives and protect communities in both our countries.”

Mr Trump has sent a series of tariff letters to 23 countries so far, including one putting a 50% tariff on Brazil in part for the ongoing trial of its former president Jair Bolsonaro for trying to stay in office after he lost the election in 2022.

Mr Trump was similarly indicted for his efforts to overturn his election loss in 2020.

The higher rates would go into effect on 1 August.

Shortly after Mr Trump unveiled his “Liberation Day” tariffs on 2 April, there was a huge sell-off on the financial markets. The US president later announced a 90-day negotiating period, during which a 10% baseline tariff would be charged on most imported goods.

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But in an interview with Sky News’s partner network NBC News, Mr Trump said he plans to impose higher blanket tariffs on most US trade partners.

“We’re just going to say all of the remaining countries are going to pay, whether it’s 20% or 15%. We’ll work that out now,” he said.

He added: “I think the tariffs have been very well-received. The stock market hit a new high today.”

The US and UK signed a trade deal in June, with the US president calling it “a fair deal for both” and saying it will “produce a lot of jobs, a lot of income”.

Sir Keir Starmer said the document “implements” the deal to cut tariffs on cars and aerospace, adding: “So this is a very good day for both of our countries – a real sign of strength.”

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The US president also teased a “major statement” he will make on Russia over its war with Ukraine.

“I’m disappointed in Russia, but we’ll see what happens over the next couple of weeks,” he said.

“I think I’ll have a major statement to make on Russia on Monday.”

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It comes as Russia’s deputy foreign minister, Sergei Ryabkov, said a new round of talks between Moscow and Washington on bilateral problems could take place before the end of the summer.

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Palestinian activist detained by ICE suing Trump administration for $20m

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Palestinian activist detained by ICE suing Trump administration for m

A Palestinian activist who was detained for over three months in a US immigration jail after protesting against Israel is suing Donald Trump’s administration for $20m (£15m) in damages.

Lawyers for Mahmoud Khalil have filed a claim against the administration alleging he was falsely imprisoned, maliciously prosecuted and smeared as an antisemite as the government sought to deport him over his role in campus protests.

The 30-year-old graduate student at Columbia University told Sky News’s lead world presenter Yalda Hakim being detained by ICE agents in March “felt like kidnapping”.

He described “plain-clothed agents and unmarked cars” taking him “from one place to another, expecting you just to follow orders and shackled all the time”, which he said was “really scary”.

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Mahmoud Khalil reunites with family after release

Mr Khalil said he was not presented with an arrest warrant and wasn’t told where he was being taken.

He said the detention centre he was taken to was “as far from humane as it could be” and “a place where you have no rights whatsoever”.

“You share a dorm with over 70 men with no privacy, with lights on all the time, with really terrible food. You’re basically being dehumanised at every opportunity. It’s a black hole,” he added.

Mr Khalil said he would also accept an official apology from the Trump administration.

The Trump administration celebrated Mr Khalil’s arrest, promising to deport him and others whose protests against Israel it declared were “pro-terrorist, antisemitic, anti-American activity”.

Mr Khalil said after around 36 hours in captivity he was allowed to speak to his wife, who was pregnant at the time.

“These were very scary hours, I did not know what was happening on the outside. I did not know that my wife was safe,” he said.

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‘Absolutely absurd allegations’

Mr Khalil said administration officials had made “absolutely absurd allegations” by saying he as involved in antisemitic activities and supporting Hamas.

“They are weaponising antisemitism, weaponising anti-terrorism in order to stifle speech,” he said. “What I was engaged in is simply opposing a genocide, opposing war crimes, opposing Columbia University’s complicity in the war on Gaza.”

A State Department spokesperson said its actions toward Mr Khalil were fully supported by the law.

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Asked about missing the birth of his son while he was in prison, Mr Khalil said: “I don’t think there’s any word that can describe the agony and the sadness that I went through, to be deprived from such a divine moment, from a moment that my wife and I had always dreamed about.”

Meanwhile, the deportation case against Mr Khalil is continuing to wind its way through the immigration court system.

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