Travel industry on tenterhooks as fallout from Trump tariffs expected

Travel experts fear Donald Trump’s trade war will see visitor numbers to and from the US plummet, as Australians heading overseas worry about how far their dollar will go. But while it has put the tourism industry on edge amid fear of a pullback in holiday spending, some say our weakening dollar will conversely make travel to Australia cheaper and help lure international visitors. The Australian dollar dipped below US60¢ briefly in the wake of the market turmoil sparked by the sweeping tariffs on imports. News of a 90-day pause in most so-called reciprocal tariffs has seen the Australian dollar recover to US62¢ but still below the value before the president sent stocks tumbling. The Australian dollar is also buying fewer baguettes. It bought €0.60¢ on January 20, the day of Mr Trump’s inauguration, but now sits at €0.55¢. Dual US-Australian citizen Shannon Laya is visiting family in Chicago in July for three weeks with her 10-year-old son. While staying with relatives means Ms Laya doesn’t have to worry about the cost of accommodation or car rentals, she expects to cut back on other typical holiday spending. “The dollar is going to make it more expensive, both in terms of the price of goods and services, and the cost of travelling there,” she said. “Usually when I’m there, I shop for clothes and things like that. Prices overall in the US are going up, which on top of the dollar, is making it even more expensive.” Ms Laya said she was also less inclined to attend Chicago sporting events such as a Cubs or White Sox baseball game. “I’m being more selective in what we’re doing and what we’re spending money on,” she said. If the volatility continues, Ms Laya — who has, outside of COVID, returned to the US at least once a year — expects to visit her home country less often. Australian Travel Industry Association chief executive Dean Long said the impact of Trump’s tariffs — which stand at 10 per cent on Australian imports — was “already playing out in clear ways”. “While services and the movement of people have not been included in this round of tariffs, the financial fallout is reducing the amount of money consumers — especially in the US and reciprocal markets — have to spend on travel,” Mr Long said. “That’s a real concern for Australian international tourism operators who are still not back to pre-COVID levels.” The association found in the year to January 31, 85,010 Australians travelled to the US — an increase of nearly 3000 from the previous January. It made the US the third most popular destination for Australians behind Indonesia — predominantly Bali — and New Zealand, the association found. However, ABS data released Friday showed the US had slipped to eighth place in the month of February. Passenger numbers across America’s 10 busiest airports were down more than 18 per cent for the week ending March 28 compared to the same time last year, according to recent analysis of US Customs and Border Protection data by Goldman Sachs. Aviation reporter Sean Cudahy told Axios that reports were emerging of “softening” international traveller demand. Mr Long said even though the travel sector hadn’t been directly hit, any measure that pulled money out of consumer pockets, impacted tourism operators. “If these conditions persist, we could see a more sustained slowdown in outbound travel and longer-term challenges for operators already managing thin margins,” he said. Mr Long said the drop in the Australian dollar was “absolutely affecting traveller behaviour”. “It’s leading to shorter trips to the US and, in some cases, decisions to delay travel altogether,” he said. But Tourism Council WA chief executive Evan Hall predicted silver linings for the State’s travel industry. Mr Hall said a weakening dollar would make travel to Australia cheaper. “WA is currently 14 per cent behind pre-COVID levels for international visitation and the lower exchange rate could help get those numbers back up,” he said. Mr Hall said Australia competed with the US for tourists from destinations such as Europe looking for nature-based trips, and the “aversion” to travel to the US could give us an advantage. “We’ll be seen as a safer and saner destination compared to the US and others,” he said. ECU sustainable tourism Professor S. Mostafa Rasoolimanesh agreed the declining Australian dollar could decrease outbound tourism, while also making Australia a more popular destination. “In the short term, tourism is unlikely to be greatly affected by the new tariffs, however this will change if the impacts of the tariffs on the global and national economies last for a long time,” Professor Rasoolimanesh said. The professor said Australian companies should focus on domestic tourism in order to mitigate the impacts of the escalating trade war. Tourism and Transport CEO Margy Osmond concurred there was “real opportunity for inbound travel”. The group’s TTF’s latest Autumn Travel Survey found Australians were increasingly travelling to destinations where the dollar travelled further such as New Zealand, Bali, Thailand and Japan. “People are still keen to explore, but they’re doing so with value front of mind,” Ms Osmond said. UWA Associate Professor Fang Liu said despite the 90-day pause, the volatility in the global economy would greatly affect tourism spending. Professor Liu expected people with pre-booked trips would likely go ahead but could cut back on souvenirs, activities and other expenses. The tourism researcher said after disruptive events such as 9/11, the global recession and COVID, Australia now had “good mechanism and procedures for handling chaos or unforeseen circumstances”. “But every situation is different and when you’re looking at recreational tourism, you’re talking about disposable income,” she said. “That means tourism is at the front line whenever there is perceived uncertainty.” Dr Liu said it was unclear if the cheaper currency would boost visitation to Australia, saying it could be outweighed by the potential of a broader economic downturn that meant people had less to spend. “Things are changing very fast and there’s a lot of speculation,” she said. “When the perceived risk level is high, people will change their travel behaviour and planning.” According to Australian Bureau of Statistics figures released on Friday, short-term visitor arrivals to Australia dropped 8.2 per cent in February compared to the same time last year. Ultimately the total number of arrivals was up 4.7 per cent, as the drop in tourists was outweighed by a 19 point jump in short-term residents returning. Globally, the travel picture had looked rosy before Trump’s “Liberation Day” sent the world into a tailspin. The World Travel & Tourism Council’s 2025 Economic Impact Research report — released last week, but based on research before the tariffs were announced — predicted international visitor spending would reach a record $3.6 trillion. That would have beaten the historic $3.04 trillion spent in 2019. Shane Earnshaw, the founder of Stirling-based travel agency Destinations by Shane, said while none of his clients had cancelled their vacations in response to the declining dollar and plummeting markets, increasing numbers of travellers were “boycotting” the US. Mr Earnshaw said his business had seen about a 20 per cent drop off in travel to the States since Trump’s victory. “It’s down to uncertainty. People who decided not to book an American holiday months ago are now thinking ‘thank God’,” he said. With the Australian dollar also weak against the Euro, Mr Earnshaw said he expected other international markets such as Vietnam and Sri Lanka to surge, whilst domestic travel remained “too expensive”. Adding to rising anti-US sentiment are international incidents of travellers being detained or denied entry. In a case that sparked a diplomatic incident, a French researcher was last month denied entry after expressing negative views of the Trump administration. And in Canada — whom Mr Trump targeted early in his tariff spree and has derided as America’s 51st state — officials have recently updated travel advice to warn of increased border security and the possibility of “several weeks of detention” for those denied entry. The Australian Department and Foreign Affairs and Trade’s Smartraveller website currently advises that “US authorities have broad powers to decide if foreign nationals can enter” and that “US authorities actively pursue, detain and deport people who are in the country illegally”. DFAT still places the US at Level one, or “exercise normal safety precautions” — the safest designation.