Trump trade wars could tank foreign tourism in the U.S., report finds

CBS News

19-03-2025

President Trump's trade policies and aggressive rhetoric threatens to hurt the American tourism sector by discouraging foreign travelers from visiting the U.S., according to a recent analysis.
The White House's escalating trade war with Canada, China, Mexico and the European Union, combined with other factors, could weigh heavily on foreign tourism in the U.S. this year, the
report from Tourism Economics
found. Canada accounts for the sharpest projected decline in travelers to the U.S., with the firm forecasting a 15% drop in the number of visits from the U.S.' northern neighbor in 2025.
Overall, international travel from all foreign countries to the U.S. is expected to drop by just over 5%, according to the report. Factoring in diminished spending by Americans traveling domestically this year, overall travel spending in the U.S. could drop up to $64 billion in 2025, according to Tourism Economics, a unit of investment advisory firm Oxford Economics.
"The negative effects of an expanded trade war scenario will reach U.S. hotel room demand in 2025," Tourism Economics said in the report. "Domestic travel will be negatively affected by slower income growth and higher prices while international travel to the U.S. will be hit by a trifecta of slower economies, a stronger dollar and antipathy towards the U.S."
The group's forecast assumes the U.S. moves ahead with an additional 25% tariff on imports from Canada and Mexico, a 25% tariff on steel and aluminum from all countries, and additional levies on Europe, Taiwan and other nations, along with retaliatory trade restrictions.
President Trump has affirmed that the tariffs on Canada and Mexico, which were paused earlier this month, are
set to take effect on April 2
. That same day, the U.S. has also vowed to impose matching tariffs on other countries equal to their levies on American imports.
In February, air travel from Canada to the U.S. fell a modest 2%, presumably because fliers had already booked and paid for their trips before tensions between the two nations surged, Tourism Economics said. But cross-border trips from Canada by car fell 24% the same month, the group found.
Canadians made more than 20 million visits to the U.S. in 2024, accounting for $20.5 billion in spending, according to the
U.S. Travel Association
.
Instead of heading south, more Canadians are likely to travel within the country or head to locales in the Caribbean and Latin America, Tourism Economics President Adam Sacks told CBS MoneyWatch.
In a speech last month, former Canadian Prime Minister Justin Trudeau urged residents to "choose Canada" and travel domestically. "It might mean changing your summer vacation plans to stay here in Canada and explore the many national and provincial parks, historical sites and tourist destinations our great country has to offer," he said.
Other factors are dampening travel to the U.S., according to Tourism Economics. That includes the U.S. threatening
200% tariffs on European wine
and Mr. Trump's fierce criticism of the EU's trade policies, along with the White House's handling of Russia's war on Ukraine, Sacks said.
"You get the perception that the U.S. is sympathetic to Russia in a conflict where they are the clear aggressor, and Western Europe is advocating for Ukraine," he said. "So there are three different levels, including recent tensions around handling Ukraine, that could affect European sentiment toward the U.S. and therefore their interest in traveling to the U.S."
Americans contribute substantially to domestic tourism, and they, too, are expected to pull back on travel spending this year amid signs of slowing economic growth. Citing the potential hit from U.S. tariffs, the Federal Reserve on Wednesday
lowered its outlook
for economic growth this year to 1.7%, while forecasting a rise in inflation.
U.S. airlines including Delta, Southwest and United have all recently cut their 2025 earnings forecasts because of lower consumer demand stemming from rising economic uncertainty.
"With weaker job and income growth and greater uncertainty, households and businesses will pull back on travel spending," Tourism Economics said. "Tariffs are expected to raise the prices paid by U.S. consumers, having a negative impact to lower-income households in particular and applying further pressure on performance at hotels in lower tier chain scales."
Tourism Economics projects a 1.4% overall decline in domestic U.S. travel, which it attributed to weaker economic growth and consumers' reduced purchasing power.
"Whatever one might think of these policies, their merits and longer term goals, the immediate effects are categorically negative," Sacks said of the Trump administration's tariffs.