US tourism industry in free fall - Risks a travel trade deficit for the first time this century
The travel and tourism industry, which accounts for about 3% of the United States' GDP, has long been one of the most powerful sectors of the economy, especially when it comes to trade. The U.S. has run a trade surplus in travel every year this century. Until this year.
A decline in foreign visitors to U.S. soil caused travel services exports to fall at an annual rate of 7.8% in the first quarter, according to the GDP report. The Travel Association says the United States is now running an annual travel trade deficit of $50 billion, compared with a surplus of $3.5 billion in 2022.
"This likely reflects the growing hostility from many foreigners towards the US. We are likely to see further declines in the coming quarters, particularly among students coming to study in the United States," the economists say.
According to the Institute for Educational Enrollment, there has already been an 11% drop in international student enrollment compared to last year. The organization expects the decline to result in a loss of up to $4 billion in spending.
Other data confirms the gloomy outlook for travel. The International Trade Association reported earlier this month that visitor arrivals to the United States by air have fallen by more than 11% since March 2024. Tourism Economics, a firm that tracks the hospitality industry, recently revised its forecast for foreign visitors to the United States to reflect a 9.4% decline, after predicting a 9% increase in December. The firm estimates that international visitor spending in the United States will fall by 5% as a result, a loss of $9 billion this year.
"Trump's policies and statements have produced a negative shift in sentiment towards the US among international travelers," the firm said.
US airlines are feeling the pain. Several recently revised their full-year forecasts as tariffs, inflation and faltering consumer demand forced a reassessment of expectations for 2025.
The outlook for international travel is unlikely to improve, given that the first-quarter GDP figures did not take into account President Donald Trump's April 2 announcement of sweeping tariffs.
This has sparked a clear backlash from Canada, where citizens have criticized Trump's speech to make it the 51st state. In March, the number of Canadians taking road trips across the U.S. border was 32% lower than in the same month a year ago. There was also a 13.5% drop in air travelers from Canada. Advance bookings for flights from the U.S. to Canada for the April-September period were down more than 70% compared to a year earlier.
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