The travel industry doesn’t know what to expect from whipsawing U.S. policies. But concerns are hitting the bottom line, which could mean higher prices, and more confusion, for tourists.
The on-again, off-again tariff policy of the Trump administration has wreaked havoc across the global economy, including the travel industry. Until Wednesday’s 90-day suspension of reciprocal tariffs, the American dollar was showing signs of weakening, hotels faced higher operating costs and travelers were nervous about booking.
Even before reciprocal tariffs were imposed, the Conference Board’s latest index on consumer confidence had dropped to the lowest level in 12 years, possibly driving a chill in travel demand. And, in a survey of its members in early April, the American Society of Travel Advisors said nearly 54 percent reported a decrease in consumer demand driven by economic concerns.
For the moment, a 10 percent base line tariff against most countries has been left in place, with China facing a 125 percent tariff on its goods. While it’s unclear what will happen after the 90-day pause, here is a look at how tariffs, or just the threat of them, may affect the travel industry.
The Dollar Holds, for Now
Early in the year, the dollar was close to par with the euro. It is now about $1.10 to the euro, which means a hotel room that costs 100 euros would be around $110.
“Normally, you would expect the U.S. imposition of tariffs to be mildly positive for the U.S. dollar,” said Michael Melvin, the executive director of the master of quantitative finance program at the University of California San Diego. “We saw effects like this in the first round of announced tariffs on Mexico and Canada, that was quickly reversed when the president announced a reversal of those tariffs,” he said.
But retaliatory tariffs from other countries could neutralize the effect on the dollar, according to the Budget Lab at Yale University, a nonpartisan policy research center.