Trump announces 50% tariff on copper, effective August 1
By Siddarth S
(Reuters) -Weakening travel demand, signaled by grim earnings forecasts of travel-related companies, may erase billions of dollars from the U.S. economy this year as the Trump administration’s trade policy takes a toll on consumer sentiment, analysts have warned.
"Anti-American sentiment could be driving a decline in international tourism, which is considered a service export," J.P.Morgan said in a note last week.
Goldman Sachs and J.P.Morgan projected lower foreign travel spending to trim 0.1% from U.S. GDP this year, adding that the hit could be as much as 0.2% to 0.3%.
As of the first quarter of 2025, U.S. GDP stands at $23.53 trillion, according to LSEG data, and the impact could amount to anywhere between $23 billion and $71 billion, based on Reuters calculations.
Last month, Delta Air Lines (NYSE:DAL), a major international carrier, warned travel demand has "largely stalled," scrapping its forecasts for the year.
Southwest Airlines (NYSE:LUV), American Airlines (NASDAQ:AAL), Alaska Air (NYSE:ALK) and Frontier pulled their guidance, while United Airlines gave two different forecasts as the trade war creates the biggest uncertainty for the industry since the COVID-19 pandemic.
Vacation rental platform Airbnb forecast second-quarter revenue largely below Wall Street estimates, while hotel operator Hilton indicated travelers were in a "wait-and-see" mode.
"Tariff announcements and a more aggressive stance toward historical allies have hurt global opinions about the United States. The bigger issue is a pullback in tourist visits to the U.S.," Goldman Sachs said in March, at a time when Europeans were already booking fewer trips to the country.
President Donald Trump’s erratic tariffs have also led to global consumers boycotting and ditching U.S. products and brands.
Spending by foreign travelers and tourists in 2024 accounted for 0.7%, or $215 billion, of U.S. GDP, according to J.P.Morgan estimates.
A 10% reduction in spending is a direct 7-basis point hit to U.S. GDP, the brokerage added.
DOMESTIC PULLBACK
Americans have also been wary about non-essential spending as household budgets get squeezed amid worries of a probable recession brought on by the fluctuating trade policies.
The U.S. travel and tourism industry accounted for about 3% of GDP and more than six million jobs in 2023, according to the Bureau of Economic Analysis.
Following a strong run in 2023 and 2024, this year has had a slow start, with Bank of America-aggregated card data showing softer lodging, tourism and airline spending through the week ending March 22.
Earlier this week, data showed, the U.S. economy contracted for the first time in three years in the first quarter, while consumer sentiment remained weak in April.