MW International travelers are avoiding the U.S. Why American jobs will take a hit.

By Paul Brandus

Goldman Sachs forecasts that under a worst-case scenario, reduced visits and canceled purchases of U.S. goods could cost the economy $90 billion

Travel and tourism is a huge part of the U.S. services economy, supporting some 9.5 million American jobs.

A few years ago, I read an article about America, as seen through the eyes of others. It mentioned a young Swedish woman. It seemed that she had long dreamed of visiting the U.S. What she really wanted to do, she said, was to land in Los Angeles, rent a convertible and drive up the Pacific Coast Highway with "California Dreamin'" by the Mamas and Papas blaring on the car radio.

I hope she made it.

Fewer foreigners dream of coming to the U.S. today. Lately there's been a sharp drop-off in the number of global travelers to the United States. The Financial Times places the blame squarely on "political and economic tension and fears of a hostile border under President Donald Trump."

Europe, Asia and Latin America - the shunning of the United States is widespread. And these places aren't even America's biggest source of tourism money. That would be Canada. Guess what? Canadians are staying away too. In droves. Airline bookings are down by more than 70% for the upcoming crucial summer travel season. Exchange rates may be one reason - until recently, the strong U.S dollar (DX00) has made travel here more expensive - but there is also deep anger against Trump's tariffs, along with talk about how Canada should be the 51st state.

How would Americans would feel if some blowhard Canadian leader started talking about how the United States should become Canada's 11th province?

Not surprisingly, such words and actions are seen as arrogant and hostile. How would Americans would feel if some blowhard Canadian leader started talking about how the United States should become Canada's 11th province?

Trump is obsessed with tariffs (one of the most "beautiful" words in the dictionary, he says) and the manufacturing of physical goods. These are certainly important matters. As of 2023, reports the U.S. Bureau of Labor Statistics, there were 12.9 million manufacturing jobs in the U.S., about 7.6% of the nation's workforce. Yet this is less than one-tenth the size of America's giant services industry, which in 2023 employed more than 135 million Americans in a wide range of professions, like healthcare, finance, education - plus travel and tourism.

In fact, travel and tourism is a huge part of the services economy, supporting some 9.5 million American jobs. The Commerce Department's International Trade Association $(ITA)$, which provided the data, adds that the industry contributed $2.3 trillion to the U.S. economy in 2022. In fact, the ITA reports that travel and tourism is the largest single services export for the United States, accounting for 22% of the country's services exports and 7% of all exports in 2023.

So when Trump insults - even threatens - friends around the globe because of his obsession with one part of the U.S. economy, it hurts other parts. The data appear to show a sharp correlation between Trump's behavior and the number of foreigners landing at LAX, JFK or some other major U.S. gateway. Airlines, hotels, restaurants, cruise lines, casinos are all feeling the pinch. In a recent client note, Goldman Sachs said that under a worst-case scenario, the hit from reduced visits and canceled purchases of U.S. goods could be $90 billion.

Don't expect the American consumer to come to the rescue. Consumer sentiment has fallen off a cliff since December, says a closely watched University of Michigan survey. "Sentiment has now lost more than 30% since December 2024 amid growing worries about trade war developments that have oscillated over the course of the year," survey director Joanne Hsu said. "Consumers report multiple warning signs that raise the risk of recession: expectations for business conditions, personal finances, incomes, inflation, and labor markets all continued to deteriorate this month."

It's important to note that interviews for the survey were conducted just prior to Trump's April 9 announcement of partial tariff reversals, yet the negative sentiment, as the saying goes, seems baked into the cake.

This consumer gloom has already shown up in several exchange-traded funds in the travel/leisure space. U.S. Global Jets JETS, which tracks the airline industry, is down about 25% since the start of the year. An ETF tracking hotels - AdvisorShares Hotel BEDZ - is off about 20% over the same period. And a broadly diversified ETF covering consumer discretionary, Consumer Discretionary Select Sector SPDR XLY, whose holdings include restaurants, cruise lines, and booking firms, is down about 16% in 2025 so far.

Delta Airlines $(DAL)$ CEO Ed Bastian put words to this at a recent investor conference hosted by JPMorgan Chase, when he referred to ongoing events as a "parade of horribles." The comment came as the airline announced it was slashing its first-quarter revenue forecast by $500 million, or about 4%.

Vulture investors are hovering. Discussing hotel REITs, a recent Baird research report called investor sentiment "extremely negative," with "low investor interest" and "nonexistent conviction." Analyst Michael Bellisario notes that "a few people are 'poking around' here and there because the stocks look 'cheap' after they have declined so much in recent weeks." He notes an increased focus on balance sheets, refinancing risks and recession scenarios.

International magnets like New York, Los Angeles and Miami could be hurt more than other places.

Coming back to foreigners increasingly shunning America, some additional context is useful. While only about 5% of all domestic hotel-room nights are booked by international travelers, one senior executive in the hotel industry tells me those nights carry greater weight, because "foreign guests tend to stay longer, pay higher rates and spend far more during their stay." The executive adds that the impact of this higher spending is greater in gateway, as opposed to secondary, cities. In other words, international magnets like New York, Los Angeles and Miami could be hurt more than other places. "Lower foreign travel absolutely will result in less spending and hours for workers in the industry," the executive adds.

When might this current gloom lift? This depends, of course, on several things which seem linked. The length and severity of the tariff war is uncertain and therefore destabilizing. In turn, this uncertainty is causing companies to lower business forecasts, and to be extra cautious about everything from capital expenditures to hiring. Fears about job security, inflation and personal finances are also causing the all-important consumer to batten down the hatches. The White House should consider the degree to which its policies and messaging is telling travelers to find other destinations.

More: Trump's 'reciprocal tariffs' are dangerous - and will make Americans poorer

Also read: This looming market risk could spell trouble for gold - and investors are missing it

-Paul Brandus

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April 22, 2025 12:59 ET (16:59 GMT)

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