With foreign tourists boycotting the U.S., businesses brace for falling sales

CNBC

10-05-2025

Anacortes, a small coastal town in Washington state, typically bustles with tourists during the summer months.
But local business owners like Kaia Matheny are bracing for less foot traffic — and a financial hit — this year as tensions around trade and concerns about immigration policy push foreigners to reconsider the U.S. as a travel destination.
Matheny is the co-owner of Adrift Restaurant, a nautical themed farm-to-table eatery in downtown Anacortes. The town, a gateway to the San Juan islands, is a two-hour drive south of Vancouver.
She's seen sales fall amid fewer customers from Canada, which is generally the U.S.' top source of international visitors. Air and land arrivals from Canadians fell 14% and 32%, respectively, in March compared to the same time in 2024, according to Tourism Economics.
A sharp decline in foot traffic among foreign tourists looks set to persist through summer, data shows. Matheny is "wary" about what that will mean during peak season, which typically kicks off in June.
Tourism "won't be what it is usually," Matheny said. "We'll batten down the hatches and make the best of it."
Tourism is a big U.S. export: Foreign visitors spent more than $180 billion here in 2024, more than all agricultural exports combined, said Geoff Freeman, president and CEO of the U.S. Travel Association.
However, international visits to the U.S. fell 12% year-over-year in March, according to Oxford Economics.
It's not just Canada: Visits from Western Europe, Asia and South America — historically the U.S.' highest-value travel markets — are also down by double-digit percentages, according to the U.S. Travel Association.
Data suggests the weakness will persist through the summer.
Air bookings for overseas summer travel to the U.S. are pacing about 10% behind the same time last year, according to Tourism Economics, which is affiliated with Oxford Economics. (These were bookings made as of March.)
Canada and Mexico are worse, data show. Summer bookings from Canada to the U.S. are down more than 30%, for example.
"Foreign visitations to the US are the largest services export in the country and the outlook is quickly souring," Ryan Sweet, chief U.S. economist at Oxford Economics, wrote in a research note published in May.
The loss in international tourism is expected to cost the U.S. economy $10 billion this year compared to 2024, said Adam Sacks, president of Tourism Economics. The U.S. Travel Association pegs the potential loss at an even higher $21 billion in 2025, if current travel trends continue.
"It's alarming," Freeman said. Many businesses and destinations "count on the international visitor, in particular."
The tourism pullback appears to be "more a U.S. issue right now" rather than a broad global weakness in travel, since other regions are seeing positive tourism growth, said Lorraine Sileo, senior analyst and founder of Phocuswright Research, a market research firm.
Domestic tourism isn't poised to pick up the slack — the market was slowing heading into 2025 and the "revenge travel" trend, which had propelled Americans to travel due to pent-up demand after Covid-19 lockdowns, has largely been played out, she said.
"I don't think it's all doom and gloom for the U.S. travel industry," Sileo said. "But it'll be a tough year."
Many factors underpin the decline in international visitors, travel experts said.
For one, President Donald Trump has announced several rounds of tariffs, sparking fears of a global trade war and raising the average import duties to the highest level since the early 1900s.
Trade wars are "intrinsically combative" with the international community, Sacks said.
In early April, China issued a risk alert for tourists heading to the U.S., citing deteriorating economic relations and domestic security. Several European nations also recently issued U.S. travel advisories, citing reasons such as heightened border security and potential issues around travel documents.
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Trump has also drawn the ire of Canadian citizens and lawmakers through repeated suggestions that Canada become the 51st U.S. state, experts said. Likewise for Greenland, which is part of Denmark.
"Now is also the time to choose Canada," former Prime Minister Justin Trudeau said during a speech in February. "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 added.
Searches conducted in March and April from Canadians for travel to the U.S. dropped 50% from 2024, according to Beyond, a data provider on the global short-term rental market.
"We saw a nearly immediate drop in Canadian search activity after the tariff news broke back in February," Julie Brinkman, CEO of Beyond, wrote in an e-mail. "While interest in the U.S. dropped, Mexico saw a 35% increase in searches. That tells us travelers aren't canceling trips — they're choosing new destinations."
Anecdotes on social media support that notion.
"Proud to say we've cancelled 3 US based cruises over the next 2 years and instead will be vacationing in Europe and Canada," one Reddit commenter wrote recently.
Growing concern tied to U.S. immigration policy is perhaps the most consequential development in recent months, experts said.
"Whether fair or not, a perception is taking hold that more people are being detained, more devices [are] being searched and legal travelers [are] being deported back to their origin country," Freeman said. "That creates a great deal of fear."
Nationally, small and mid-sized business profits have already "deteriorated sharply" amid the travel slowdown, said Aaron Terrazas, an economist at Gusto, a payroll and benefits provider.
The share of "tourism" companies that are profitable fell to 32% in April 2025, down from 41% and 43% in April 2024 and 2023, respectively, according to Gusto. The category includes tour operators, condo or time-share agencies and ticket or reservation agencies.
The share of profitable "accommodation" businesses fell to 36%, down from 44% and 45%, Gusto found. The category includes small hotels and motels, guesthouses, cottages and cabins, and RV parks and campgrounds.
Slower customer traffic — and lost income — are the main culprits, rather than an increase in expenses from inflation or labor costs, Terrazas said.
The erosion in profitability and revenue is "unusually sharp and unusually sudden, particularly for a time of year when we normally start to see travel pick up," Terrazas said. "There's no obvious reason why domestic travel would collapse so sharply and so suddenly in a single month, whereas for international travel there are more obvious explanations."
The longer the slowdown continues, the greater the odds businesses will be forced to make tough choices and potentially cut staff, Terrazas said.
Financial losses come at a time when the U.S. hasn't returned to pre-pandemic levels of travel, further pressuring businesses that rely on tourism, Freeman said. The U.S. welcomed 72 million foreign visitors in 2024, shy of the 78 million in 2019, he said.
While non-residents account for less than 10% of all U.S. tourism demand, they are far more "lucrative" spenders, Freeman said.
The average overseas visitor spends more than $4,000 per person per visit, eight times more than the average American tourist spends domestically, Freeman said. The average Canadian and Mexican tourist spends $1,200 per visit.
Less foreign travel will have a disproportionate impact on certain areas.
Las Vegas; Los Angeles; Miami; New York; Orlando, Florida; and San Francisco, for example, account for the largest share of foreign tourists, said Sweet of Oxford Economics.
While New York has a large, diverse economy that can likely absorb a tourism loss without going into recession, the same probably isn't true of places like Las Vegas or Honolulu, he said.
"These economies are very, very sensitive to tourism," said Sweet. "This is their main economic driver."
So far, Matheny, the co-owner of Adrift Restaurant, has seen monthly sales fall 4% relative to last year — not a "huge" decrease, but a "noticeable" one, she said.
The restaurant has had to cut its buying by an equivalent amount, she said. That in turn hurts the local economy in Anacortes, since the restaurant sources the bulk of its food from local farms and fisheries — hurting their bottom lines, too, said Matheny.
"It's a community impact," she said.