US Rolls Up Welcome Mat for International Travel
Trump tariffs set to raise effective rate above 1930s levels.
Our updated US Inbound forecast eclipses the downside scenario estimates we released in late February.
During a wave of uncertainty, one thing is evident—Trump’s policies and pronouncements have produced a negative sentiment shift toward the US among international travelers. We expect the correlating decline in international travel to the US to be strongest in 2025. Persisting degrees of impact are expected throughout the remainder of Trump’s second term.
The US travel sector faces a mix of headwinds: 1) negative sentiment, 2) border and immigration policies and uncertainty, 3) reduced competitiveness with a strong dollar, 4) economic slowing in Canada and Mexico, 5) hasty efforts at government efficiency, and now 6) uncertainty on the domestic economy.
Charged by these challenges, Tourism Economics’ latest Global Travel Service update includes a stark downgrade for inbound international to the US:
- In December 2024, the forecast called for an 8.8% growth in international visitation, with a 16.0% increase in visitor spending. In comparison, this updated outlook represents a substantial setback with the full recovery of international visits to the US pushed out to 2029.
- We now expect a 9.4% decline in international visitor arrivals for 2025, led by a 20.2% decline in visitation from Canada.
- We forecast international visitor spending in the US to decline 5.0%, a loss of $9.0 billion in spending this year alone.
- This loss includes $6.4 billion of decreased spending in destinations, plus $2.5 billion of lost transportation spending.
Leisure travelers have options. Negative shifts in sentiment toward the US may adversely impact its global market share, resulting in a 1.5 percentage point market share loss by 2026.
Running the Tariff Numbers
On April 2, President Trump announced a sweeping set of tariffs, imposing a minimum 10% rate on all countries, with some reaching significantly higher levels. Our initial assessment indicates that these tariffs will elevate the effective US tariff rate to nearly 30%. This surpasses levels seen in the 1930s and exceeds projections from our original full-blown Trump scenario.
Oxford Economics simulated the “Liberation Day” tariff proposals. Results show US GDP growth slowing to 1.4% (down from 2.0%), with core inflation rising to 3.9% this year, compared to 3.1% in the baseline. The US avoids a recession but remains highly vulnerable.
This scenario does not account for potential retaliation or heightened uncertainty, both of which may intensify the damaging effects of tariffs. If these tariffs remain in place as announced, the risk of a recession within the next 12 months increases for three key reasons:
- Inflation will rise beyond previous estimates, eroding real disposable income and suppressing consumer spending.
- Financial market conditions will likely tighten, and potential equity declines could dampen spending through the wealth effect.
- Persistent trade policy uncertainty will weigh on business investment in equipment, nonresidential structures, and private hiring.
The “Liberation Day” announcements, if fully implemented, stand to send advanced economies back into industrial recession just as they were set to return to growth. Rising uncertainty and reduced investment will only reinforce these trends.
Waves of Uncertainty
More questions than answers remain. It is unclear whether these tariffs set a ceiling, whether rates could climb higher, or how long they will stay in place. The 10% across-the-board tariffs take effect April 3. Higher reciprocal rates face a delay until April 9, leaving room for modifications and potential exemptions. This could mark the start of extensive negotiations between the Trump administration and trading partners. The administration’s broader goals remain unclear—whether to raise revenue, fund the fiscal package, or re-shore manufacturing.
Ongoing Evaluation
Oxford Economics and Tourism Economics continue to refine projections as additional details emerge. Potential foreign retaliation, trade policy adjustments, and industry sector effects are being monitored. Stay tuned for further insights on the evolving economic impact.