Trump’s New Tariffs and the Potential Hit to Travel

President Donald Trump on Wednesday laid out a sweeping set of tariffs that would hit products from a long list of countries. 

Among the proposed tariffs: A baseline of 10% for trading partners; 25% on all imported cars; and reciprocal tariffs on at least 50 countries that can reach nearly 50%. 

The plans go further than many were expecting. Reciprocal tariffs aren’t based solely on rates from other countries: “We will calculate the combined rates of all their tariffs, non-monetary barriers, and other forms of cheating,” Trump said at a White House Rose Garden event.

For the travel industry, the impact is indirect. Tariffs apply to imported products — think cars, washing machines, and even champagne. They don’t get added to airfares, hotel rooms, or tours.

But the knock-on effects could be significant. Tariffs can lead to higher prices making America a more expensive destination for visitors. And then there are the vibes. Will tourists still be eager to visit a U.S. that is engaged in a trade war with their home country?

“Trump policies might cut U.S. travel growth by half,” said Seth Borko, head of Skift Research, referring to a range of actions like a possible tariff war and increased uncertainty about how border agents will interpret and enforce border rules.

Stocks were falling sharply in the hours after Trump’s announcement.

The Impact on Hotels

Hoteliers face two potential areas of added expense: costs for new construction, and costs for furniture, fixtures, and equipment. 

Tariffs on construction materials such as steel may eventually push prices up, as Skift Research noted in the report, U.S. Hotel Supply Outlook: How Slowing Growth Is Shaping the 2025 Market.

“If tariffs lead to rising costs, developers may once again face financial hurdles that could slow project timelines,” wrote Pranavi Agarwal, senior research analyst.

Hoteliers may also face rising costs for furniture, fixtures, and equipment.

Among extended-stay hotel operators, there is cautious optimism. Reshoring manufacturing to the U.S. could benefit the extended-stay segment due to increased demand for temporary housing for workers near new projects.

The Impact on Airlines

Tariffs have started to impact U.S.-Canada travel. United Airlines CEO Scott Kirby said at an investor conference in March that the carrier had seen a “big drop” in Canadian traffic to the U.S. 

Boeing chief financial officer Brian West said the company isn’t expecting to see a “material near-term impact” from tariffs. The U.S. plane maker has a massive backlog in orders, which West said would shield the company in the short-term. However, he added that there was some concern that tariffs could have an impact on the availability of parts. 

Airbus could prioritize deliveries to non-U.S. customers as a result of the tariffs, the plane maker’s CEO said in February, according to Reuters. “We have a large demand from the rest of the world, so [if] we face very significant difficulties to deliver to the U.S., we can also adapt by bringing forward deliveries to other customers which are very eager to get planes,” Airbus CEO Guillaume Faury said. 

Speaking to Skift last week, Ryanair CEO Michael O’Leary, highlighted the level of uncertainty: “There’s lots of unintended consequences built in around what Trump is doing. We honestly don’t know if it will be net-positive or net-negative — we’ll just have to wait and see.” 

The Dublin-based company is one of Boeing’s largest airline customers, with hundreds of new planes on order.

Vibe Shift

Tariffs are one thing, but heated rhetoric around trade wars can lead to heightened patriotism and reduce the willingness to travel to the U.S.. Canadian visits, for example, have already begun to decline, early data suggests.

Porter Airlines president Kevin Jackson told Skift that the Canadian carrier decided to pause marketing for U.S. destinations. The airline is the third largest in Canada. 

“Canadian consumers have made it clear to us that they don’t believe that we should be promoting travel to the United States,” Jackson said. 

Accor CEO Sébastien Bazin said Tuesday that there was “bad buzz” around travel to the U.S. and that summer bookings from Europeans were down 25%. 

Virgin Atlantic’s CFO recently warned of slowing U.S. demand.

Recession Watch and the ‘Wealth Effect’

Measures of consumer confidence have plummeted but the impact on travel spending is mixed. A survey by the Conference Board showed that despite a “gloomy” outlook, households planned to increase their travel spending.

But Bank of America said this week that spending on lodging services and tourism-related services was about 2.5% below last year’s levels, while spending on air travel was down around 6%.

According to Skift Research, the top 9% of households account for 30% of U.S. travel spending. The top 15% account for 40%. 

A so-called “wealth effect” can account for some of that – a soaring stock market and rising home values has increased net worth for many households and encourages more spending, including on travel.

The prospect of rising tariffs has been a drag on stocks, however, with the S&P 500 at points down 10% from highs. Stocks were falling following Trump’s remarks Wednesday. Continued declines in asset values could lead to a pullback in spending from luxury travelers.