U.S. Economy Faces Billions in Losses as Travel Demand Dips Amid Trade Tensions
The United States economy is at risk of losing billions of dollars this year as weakening demand for travel, exacerbated by the Trump administration’s trade policies, threatens to slow growth. Analysts are now predicting that this decline could have a significant negative impact on the nation’s GDP, particularly as international tourism, a key contributor to the economy, is expected to take a hit.
Economic Impacts of Weakened Travel Demand
As of early May 2025, analysts have issued stark warnings that the downturn in travel demand could cost the U.S. economy between $23 billion and $71 billion. According to J.P. Morgan and Goldman Sachs, a reduction in foreign travel spending could lower U.S. GDP by as much as 0.3%. These estimates are based on projections of reduced consumer spending, especially by international tourists, which is now seen as a major economic vulnerability.
Travel-related industries, including airlines and hospitality companies, have reported significant slowdowns, with Delta Air Lines, Southwest Airlines, American Airlines, Alaska Air, and Frontier Airlines all pulling back from their earlier forecasts for 2025. Additionally, Airbnb has predicted a major shortfall in second-quarter revenue, while Hilton Hotels noted that consumers are adopting a “wait-and-see” approach when it comes to vacation plans.
These developments signal a more significant economic challenge that could drag down overall growth in the U.S. economy.
Trade Policy Fallout: Weakened Global Perception of the U.S.
A key factor contributing to the decline in travel demand is the ongoing trade tensions and the Trump administration’s controversial policies, including aggressive tariffs and anti-American rhetoric. Goldman Sachs points out that such policies have fostered a growing sense of anti-American sentiment abroad, which has led to a reduction in international tourism to the U.S. The economic impact is particularly evident in Europe, where fewer tourists are booking trips to the U.S. compared to previous years.
The trade war with China and the imposition of tariffs have also caused global consumers to reconsider their purchases of American goods and services. In fact, consumer spending by international tourists in the U.S. amounted to $215 billion in 2024, accounting for around 0.7% of the country’s GDP, according to J.P. Morgan estimates. A 10% reduction in spending could reduce GDP by an additional 7 basis points, underlining the significant role that tourism plays in the U.S. economy.
Domestic Concerns: Americans Tighten Their Purse Strings
Domestic spending has also been on the decline, as many U.S. households are feeling the strain of fluctuating trade policies and increasing uncertainty about the economic outlook. Consumer confidence has taken a hit, particularly as fears of a potential recession mount. Americans are increasingly cautious about non-essential spending, which includes travel and tourism.
In 2023, the U.S. travel and tourism industry contributed around 3% of GDP and provided more than six million jobs, according to the Bureau of Economic Analysis. However, after a strong performance in 2023 and 2024, the sector has faced a slower start in 2025, with Bank of America card data showing a drop in spending on lodging, tourism, and airlines.
The Road Ahead: Navigating Uncertainty in the U.S. Economy
As the U.S. economy grapples with these challenges, the travel and tourism sector faces an uncertain future. While the long-term effects of the ongoing trade policies remain unclear, the immediate impact of reduced travel demand is evident. Analysts are urging the U.S. government to address the factors driving this downturn in order to prevent a larger-scale economic contraction.
For now, it remains to be seen how the combination of weakening travel demand, trade uncertainty, and domestic economic pressures will affect the broader economic landscape. With billions of dollars potentially at risk, the coming months will be crucial in determining whether the U.S. can maintain its economic momentum or whether a slowdown is inevitable.
