The U.S. Senate reached a bipartisan appropriations agreement, but there is a high probability of a "technical shutdown" over the weekend, and the Department of Homeland Security bomb has not been defused

The U.S. Senate Democrats and Republicans reached a bipartisan appropriation agreement, with most agency funding guaranteed until the end of September, but the Department of Homeland Security was only granted a two-week extension, and the immigration enforcement dispute extended until mid-February.
(Synopsis: Trump said he did not want the U.S. government to shut down: he would avoid a shutdown through “bipartisan cooperation”, but the prediction market did not pay for it)
(Background supplement: The U.S. government will shut down again, will the currency circle be smashed again?)

Table of contents of this article

• Trump’s rare transformation into a “deal maker”
• The Minneapolis incident ignited the fuse
• “Technical shutdowns” over the weekend are inevitable
• The short honeymoon period is officially over

Less than 24 hours before the midnight deadline on Friday Eastern Time, U.S. Senate Democrats and the White House have finally finalized a key bipartisan appropriations agreement: ensuring that most federal agencies such as the Pentagon, the Department of Education, and the Department of Labor can operate until the end of September this year, greatly eliminating market uncertainty about the government shutdown.

However, the agreement only excludes the Department of Homeland Security (DHS) from long-term funding, giving only two weeks of short-term “life extension” funds. What’s even more troubling is that with the House of Representatives currently in recess, Washington may still face a brief “technical shutdown” that will extend this political game until next week.

Trump rarely transformed into a “deal maker”

The most interesting change in this negotiation is that President Trump has changed his aggressive style in the past. He made a rare warning on Truth Social, bluntly stating that a long-term shutdown would be “the only factor that could slow down the pace of U.S. development” and called on Congress to ensure that the government receives full funding. This statement is completely different from his first term of using the shutdown as a bargaining chip.

This strategic shift may also reflect the realistic considerations of Trump’s second term as it enters its second year. Rather than creating political chaos to intensify fundamentals, the White House now urgently needs stable economic data to support political performance.

After all, any prolonged shutdown will directly impact employment data, consumer confidence, and even stock market performance.

The Minneapolis incident ignited the fuse

As for the main reason why the negotiations were on the verge of breaking down, the Democratic Party insisted on specific reforms to Immigration and Customs Enforcement (ICE). The trigger for this controversy stemmed from a law enforcement operation in Minneapolis in January 2026, which resulted in the tragic deaths of two American citizens, sparking outcry across the United States.

After the incident, the Democratic Party immediately put forward a number of reform demands, including mandatory requirement for law enforcement agents to wear body cameras and measures to restrict masked law enforcement. The Senate even rejected a bill that would have included DHS’s full funding earlier because of these controversies.

The final result of a compromise between the two sides was to cut DHS separately and give it a two-week extension, but this did not solve the problem, but only postponed the battlefield on border control and judicial human rights to mid-February.

“Technical shutdowns” over the weekend are inevitable

From a practical operational point of view, even if the Senate successfully votes to pass the agreement tonight, the House of Representatives will most likely not resume until next Monday (February 2). This means that between midnight on Friday and Monday, there will be an inevitable gap in funding.

However, since this period coincides with the weekend and most federal agencies are not operating, the impact of this “technical shutdown” on financial markets and actual government services is expected to be quite limited, and the market generally regards it as a harmless transition.

The real variable lies in how House Speaker Mike Johnson appeases the discontent of the Liberal caucus. This conservative core group has complained about the practice of “cutting DHS”, believing that it is tantamount to making concessions to the Democratic Party on the border issue.

Although there is a high probability that the vote will pass next Monday, there is still some uncertainty.

The short honeymoon period is officially over

Washington once again staged the familiar “reining in the horse” drama. On the surface, the long-term funding agreement eliminated most tail-end risks, allowing major departments of the federal government to continue operations until the end of the fiscal year.

But cutting the thorniest immigration enforcement issues into separate pieces, the two sides will face an even more intense policy showdown in mid-February as DHS funding lasts only two weeks.

At that time, the Democratic Party is bound to bring the ICE reform request to the negotiating table again, while the Republican Party will stick to a tough stance on border enforcement. For the market, this means that a new round of political uncertainty will return in two weeks. The core contradiction of this funding struggle has not been resolved, but has been temporarily shelved, and the real tough battle is yet to come.

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