The Backfire Effect of Tariffs on U.S. Tourism: Impacting Major Markets
The ongoing trade war initiated by the U.S. administration through widespread tariff imposition on key trade partners aims to address the significant trade deficit and stimulate domestic economic activity. However, this strategy may inadvertently harm the tourism sector, which is vital to the U.S. economy. In 2024, the United States was the third most-visited country globally, attracting 72.3 million travelers and generating EUR175 billion in tourism revenue, according to the World Travel and Tourism Council (WTTC).
While there is no direct correlation, the introduction of tariffs has sparked a negative sentiment towards the U.S. among its major trading partners, potentially leading to a travel boycott. For example, in February, when tariffs on Canadian exports were first proposed, there was a 24% decrease in the number of Canadians crossing the border by car compared to the previous year. Additionally, United Airlines reported a significant drop in flight frequencies from Canada.
This trend, while not yet seen on a global scale, could emerge as countries affected by the new tariffs respond. The two largest sources of tourists to the U.S. in 2024 were Canada, contributing 20.24 million visitors, and Mexico, with 16.98 million, together accounting for over 50% of total arrivals. Both nations are now facing a 25% tariff on their exports to the U.S., which will likely impact their economies adversely, forcing businesses to raise prices or reduce profit margins. In response, these countries may implement reciprocal measures against U.S. goods.
Recognizing the importance of these countries in the tourism sector, the U.S. government has exempted goods covered under the North American Free Trade Agreement from these tariffs. However, this exemption provides only partial relief, particularly for the automotive industry, which will be fully impacted by the tariffs, alongside 50% of Mexican exports to the U.S.
In third place for tourist arrivals is the United Kingdom, which welcomed 4.03 million visitors, accounting for 5.6% of the total. Currently, the UK has not announced any retaliatory trade measures against the U.S., as it faces the lowest tariff rate of 10% on its exports. Brazil, ranking sixth in tourist visitors to the U.S. with 1.91 million, also faces a similar situation.
The largest tariff burdens are affecting countries that saw the most significant growth in tourist numbers in 2024. China, ranking tenth with 1.62 million visitors, will face a staggering 34% tariff on its exports to the U.S. This could undermine a burgeoning market of affluent travelers from China, who tend to stay longer and spend more than the average tourist. This group saw a remarkable 50% growth in 2024, marking the highest increase among the countries listed by the WTTC.
Other Asian nations, such as India and China, also recorded substantial growth in tourist numbers to the U.S., with increases of 24.3% and 21.4%, respectively, in 2024. While the recovery of tourism from Asia has been slower compared to Europe, which returned to pre-pandemic levels by the end of 2023, the potential for significant growth exists.
Germany and France round out the top ten, ranking fifth and eighth, respectively, with 1.99 million and 1.70 million visitors. Both countries, along with Spain, are subject to a 20% tariff on their exports to the U.S. This development raises concerns about the future of U.S. tourism as the negative implications of tariff policies unfold across the globe.
