Global trade wars threaten travel and tourism industry
- Paul Aage Hegvik
- Apr 7
- 6 min read
Escalating trade wars and retaliatory tariffs are already driving up hotel costs, slashing airline bookings, and shaking the hospitality sector.
Industry leaders and analysts warn: if protectionist policies continue, global travel could face its most severe disruption in decades.
The recent imposition of sweeping tariffs by the United States has triggered a series of retaliatory measures from key trade partners, notably Canada and China. These escalating trade tensions are significantly impacting the global travel and tourism industry, affecting airlines, hospitality sectors, and cruise lines worldwide.
Impact on the airline industry
The airline industry is experiencing substantial challenges due to the tariff-induced trade war. Major U.S. carriers, including Delta Air Lines, United Airlines, and American Airlines, have seen their stock prices decline by over 30% since the beginning of the year. This downturn is attributed to decreased consumer spending power and heightened economic uncertainty. Analysts warn that the increased import costs resulting from tariffs will likely be passed on to consumers, leading to higher airfare prices and potentially dampening travel demand.
Decline in cross-border travel
The imposition of tariffs has led to a marked decrease in cross-border travel. For instance, flight bookings between Canada and the United States have plummeted by over 70% compared to the same period last year. This significant decline is attributed to increased travel costs and growing anti-American sentiment among Canadians in response to U.S. trade policies.
Hospitality and cruise sectors affected
The hospitality and cruise industries are also feeling the repercussions of the trade war. Tariffs have led to increased operational costs, which are being transferred to consumers through higher prices. This price hike is resulting in decreased bookings and revenue for businesses within these sectors. The uncertainty surrounding the trade environment is further discouraging international travel, as potential travelers are wary of fluctuating costs and potential disruptions.
Global economic implications
International organizations have expressed concern over the broader economic implications of the escalating trade war. The World Trade Organization (WTO) reported a significant reduction in trade between the U.S. and China, accompanied by a reorganization of global value chains, particularly in East Asia. The Organization for Economic Co-operation and Development (OECD) highlighted that such trade disruptions could lead to increased inflation and lower economic growth, further impacting consumer spending and travel behaviors.
Global leaders respond to U.S. tariffs amid travel and tourism concerns
The recent imposition of broad tariffs by the United States has elicited strong reactions from international leaders, with significant implications for the global travel and tourism industry.
Canadian Prime Minister Justin Trudeau announced retaliatory measures, stating that Canada would impose 25% tariffs on $155 billion worth of U.S. imports. He emphasized that these actions are necessary to protect the Canadian economy and jobs. Trudeau warned Americans that the U.S. tariffs would have real consequences, including increased costs for consumers and potential job losses.
European Union's Stance
European Commission President Ursula von der Leyen expressed concern over the U.S. tariffs and indicated that the EU is preparing countermeasures. She highlighted the potential for significant economic disruption and emphasized the need for a measured response to protect European interests.
Leyen has expressed profound concern regarding the recent tariffs imposed by the United States, highlighting their potential to severely disrupt the global economy. She described these tariffs as a «major blow to the world economy,» emphasizing that «the consequences will be dire for millions of people.»
China's reaction
China's Commerce Ministry condemned the U.S. tariffs as unjustified and announced retaliatory tariffs of 34% on all U.S. goods. The ministry stated that these measures are necessary to safeguard China's legitimate rights and interests.
Impact on travel and tourism
The escalating trade tensions have raised concerns within the travel and tourism industry. Analysts predict that increased tariffs could lead to higher travel costs, reduced consumer spending power, and decreased international travel demand. This is particularly concerning for countries that rely heavily on tourism as a significant economic driver.
As the situation develops, the global community remains attentive to the potential economic ramifications of these trade policies, especially concerning international travel and tourism.
Potential surge in hotel prices and disrupted travel
In a recent analysis, Lighthouse, a leading commercial platform for the travel and hospitality industry, examined how proposed tariffs on Mexico and Canada could significantly impact hotel pricing and travel dynamics. The report underscores that trade disputes often lead to increased operating costs for hotels, necessitating adjustments in pricing strategies and potentially altering travel patterns.
Unwelcoming environment
Economists have observed that tariffs can create an «unwelcoming environment,» especially when coupled with stricter immigration policies or heightened political rhetoric. Historical instances, such as past U.S.–Canada trade disagreements, saw Canadian travelers reducing leisure trips to American destinations in response to such tensions.
Warned in 2020
Jon Bortz, CEO of Pebblebrook Hotel Trust, highlighted the broader implications of protectionist trade policies, stating, «Tourism is our biggest export… We've not had a welcoming message in the last couple of years. We're making it difficult for people to come here, and we're adding… the negatives that surround trade.» Pebblebrook Hotel Trust is a publicly traded real estate investment trust (REIT) that specializes in acquiring and investing in upper upscale, full-service hotels and resorts located in or near urban markets in major U.S. gateway cities.
Bortz has expressed concerns regarding the impact of trade tensions and tariffs on the hospitality industry. He warned alreday for five years ago, In a 2020 earnings call, Bortz noted that «trade war headlines and Brexit resolution maybe contributed» to market uncertainties affecting the sector. He emphasized that such geopolitical issues can influence traveler sentiment and demand, potentially leading to decreased bookings and revenue for hotels.
Furthermore, Bortz highlighted the importance of monitoring economic indicators and geopolitical developments, as they play a crucial role in shaping the travel and hospitality landscape. He pointed out that «travel demand is reconnecting with economic growth,» suggesting that fluctuations in the economy, influenced by factors like tariffs, directly impact the industry's performance.
These insights underscore the interconnectedness of global trade policies and the travel industry, highlighting the need for hoteliers to remain vigilant and adaptable in response to evolving economic and political landscapes.
Cascading effects
Blake Reiter, Director of Hospitality Research at Lighthouse, emphasized the cascading effects of tariffs on hotel operations:
«When people think of tariffs, they usually default to the physical items that are being taxed and come at a higher cost—they frequently don't, however, consider the ripple effects on the businesses that also rely on those physical products. Take the hospitality industry—higher prices on food, beverages, operating supplies, etc.—those costs have to be absorbed somewhere. Sometimes they will find their way onto the owner's P&L, but frequently, they will be passed onto the consumer—the traveler in the case of the hotel industry—in the form of higher rates, resort fees, etc.»
Lighthouse's analysis suggests that tariffs can influence traveler behavior by affecting disposable income and overall economic sentiment. Reciprocal measures from trade partners may lead to broader economic slowdowns, reducing families' discretionary spending on vacations and prompting companies to reconsider travel budgets. This scenario could result in lower occupancy rates and increased cancellations of large events, particularly in hotels located in convention cities or near corporate hubs.
To navigate these challenges, Lighthouse recommends several strategies for hoteliers:
Cost management and pperational efficiency: Implement energy-saving measures and streamline staffing without compromising service standards.
Value-Added offerings: Bundle amenities such as complimentary breakfast or late checkout to justify modest rate increases.
Domestic marketing focus: Shift marketing campaigns toward domestic travelers, highlighting local getaways and special deals.
Optimize distribution strategy: Evaluate and refine distribution channels to capture shifting demand patterns and strengthen direct booking channels.
Leverage AI to spot market changes: Utilize AI-powered platforms to identify changes in demand patterns, competitor pricing, and booking behavior, allowing for swift strategic adjustments.
Nadine Boettcher, Director of Product Innovation at Lighthouse, noted, «In today's rapidly shifting market, hotels that can quickly identify and respond to demand changes will have a significant advantage. AI isn't about replacing hoteliers—it's about enhancing their capabilities to make faster, more informed decisions in dynamic, shifting conditions.»
