Even prior to the United States attack on Iran’s nuclear facilities, the impact of US governmental actions were already having a negative impact on travel and tourism, and the airlines that carry many of those tourists. The impact of the United States being involved in a shooting war with Iran may further exacerbate the negative trend since the Trump administration took office. Department of Commerce data from earlier in the year have confirmed a negative trend for the US amidst a strong rise in global tourism.
A major economic blow
The World Tourism and Travel Council (“WTTC”) indicated that the US is on-pace to lose $12.5 billion in international tourism spending this year, and is the only country of the 184 analyzed that is projected to have a spending decline in 2025. While this problem has been apparent since early in the Trump administration, they are not taking actions to address the issue, which will negatively impact many in the industry, cost jobs, and economic growth.
Transatlantic yields are softening
Transatlantic airfares have dropped as Europeans continue to choose locations other than the United States for travel. The US Department of Commerce reported a 2.8% drop in overall overseas arrivals to the US in May, largely attributed to a 4.4% drop in travel from Western European countries. This trend has emerged with the onset of the Trump administration, with tariff policies and lack of support for Ukraine among the reasons Europeans are shunning the United States. OAG is reporting a 13% drop in July bookings, indicating that the trend is likely to continue and negatively impact the peak summer travel season.
US carriers have found strong demand from the United States to Europe, with growth that has offset much of the pullback in westbound transatlantic traffic. Airlines have mixed expectations for future months, with US-based carriers expecting normal demand and European airlines bracing for third quarter drops in demand, with yields adjusted to maintain load factors. With multiple revenue-sharing agreements with European airlines on transatlantic flights, these partnerships will be impacted by changes in demand.
The Drop is the Result of Policies
Tourism numbers in the United States have dramatically dropped since the onset of new policies by the Trump administration, including enhanced scrutiny of those coming to the United States and zero-tolerance policy for even minor immigration issues. Nowhere has this hit harder than in New England, where the drop off in Canadian travel has been significant.
The situation in New England shows tourism down ‘between 20% and 60%’ in key northeast states that rely on summer tourism from Canada. With 70% of Canadian tourism by car, the airline impact is misleading for northern border states, who are seeing fewer land border crossings.
Crisis Level Drops Lead to Tourism Summit
The drop-off in Canadian tourism led to a meeting last week between the US Governors and Provincial Premiers from the region to address the issue. Governors from Massachusetts, Maine, New York, Rhode Island and Vermont, as well as Premiers from Prince Edward Island, Nova Scotia, New Brunswick, Newfoundland and Labrador, and Ontario attended. Representatives from Quebec, Connecticut and New Hampshire also attended.
While no solutions were reached, it became clear that the proposed tariffs on Canada and President Trump’s caustic and insulting comments on Canada becoming the 51st state are the root cause of the sudden shift in Canadian tourism. One Canadian Premier advised the Governors to “tell your leaders that this is hurting the American economy, that this is hurting jobs in the US.”
Canada is warning travelers about potential detention in the US if the do not strictly follow entry rules. Several European countries including Ireland, the Netherlands, Denmark, United Kingdom, Germany and Finland are also issuing warnings after travelers were detained after arrival, and forced to return home. That has caused would be tourists to think twice and choose alternate destinations.
The Bottom Line
The current administration is focused on “Making America Great Again” but apparently at the expense of our allies in Canada and Europe. The non-Trump candidates have won in two foreign elections, indicating the free world’s dissatisfaction with Trump’s verbal antics and bellicose remarks. Now, with a new war underway with Iran, the impact on tourism will likely continue to make America rank 184th in tourism growth, behind 183 other countries that aren’t seeing a tourism drop. I would not call that Making America Great, but bringing third world economic results to the most prosperous nation on earth.
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