Tourism Turbulence: Navigating the Fallout of the US-Canada Tariff Clash

The latest research brief from Tourism Economics at Oxford Economics paints a stark picture of a travel sector under siege. In this expanded trade war scenario, the United States not only imposes steep tariffs on its neighbors—notably a 25% tariff on Canadian imports (10% on energy)—but also faces retaliatory measures that ripple across the board. These trade barriers set the stage for a multi-pronged impact on travel, starting with a pronounced deterioration in travel sentiment.

Anecdotal evidence cited in the study highlights a growing number of travel cancellations from Canada, forcing tour operators to pivot their marketing efforts rapidly. In a climate where potential visitors are increasingly wary, the traditional allure of US travel is waning. Tour operators must now engage in a more aggressive digital dialogue, tailoring messages to rebuild trust and spark renewed interest in travel—even as geopolitical tensions and economic headwinds persist. The first change in strategy is being felt directly in the airline business; Air Canada has stated that it will follow consumer demand and redirect more flights to alternative destinations rather than to the US.

Simultaneously, the economic repercussions of the trade war are becoming impossible to ignore. With tariffs driving up consumer prices, significantly impacting lower-income households, consumer products linked to tourism are also feeling the squeeze. Marketers in this segment face a dual challenge: not only do they have to convince travelers of the value of a trip in a pricier environment, but they must also reposition their offerings as cost-effective alternatives amid economic uncertainty.

The ramifications extend deeper into travel demand. The brief forecasts a 5.1% decline in US inbound visits alongside a 10.9% reduction in inbound travel spending relative to the baseline. This stark drop is a clear signal that the US, traditionally a global travel magnet, is at risk of losing its competitive edge. For the tourism industry, these numbers translate into a pressing need for innovative marketing strategies—ones that can counteract the negative perception of a nation entangled in trade disputes.

Beyond the immediate travel sector, the ripple effects of the trade war are expected to slow down US GDP growth to a mere 1.7% in 2025—a downturn that only exacerbates the challenges faced by travel and hospitality marketers. In this environment, every marketing dollar must work harder. From enhanced digital campaigns to targeted regional promotions, the industry is forced to craft narratives that not only highlight unique travel experiences but also assure potential visitors that the US remains a viable, safe, and exciting destination.

As the trade war unfolds, its effects on the travel and tourism industry serve as a cautionary tale of how global economic policies can reverberate to the consumer level. The challenge for tour operators, consumer products, and tourism marketers is clear: innovate or risk being sidelined in an increasingly competitive and sentiment-driven market.