The Trump administration's unaddressed tariff policies have wreaked havoc in the entire world economy, including the travel industry. Until the 90-day mutual tariff suspension on Wednesday, the US dollar showed signs of weakness, with hotels facing higher operating costs and travelers tensing about bookings.
Even before mutual tariffs were imposed, the latest index of the Conference Committee on Consumer Trust fell to its lowest level in 12 years, possibly promoting the cold of travel demand. And in a survey of members in early April, the Association of Travel Advisors said nearly 54% reported a decline in consumer demand due to economic concerns.
At this point, a 10% baseline tariff is in effect on most countries, and China faces a 125% tariff on its goods. It's unclear what will happen after the 90-day suspension, but let's take a look at how tariffs, or just a threat, affect the travel industry.
For now, the dollar will be held
At the beginning of the year, the dollar was close to the euro. The euro is currently around $1.10. This means that a hotel room that costs 100 euros is around $110.
“We are committed to providing a wide range of financial services and financial services,” said Michael Melvin, executive director of the University of California, San Diego's Quantitative Finance Program. “We saw this effect in the first round of tariffs announced in Mexico and Canada, which quickly reversed when the president announced a reversal of those tariffs,” he said.
However, retaliatory tariffs from other countries could neutralize the impact on the dollar, according to Yale University's Budget Institute, the Center for Non-partisan Policy Studies.
The dollar has fallen slightly against other currencies, including the British pound and Japanese yen, but foreign exchange rates remain relatively favorable for Americans overseas, especially in Canada and Mexico.
Slow air traffic
For airlines, tariffs can increase the cost of building planes, but carriers have more pressing concerns.
“Now the problem is economic uncertainty and the risk of recession,” said Brian Sumers, who writes The Airline Observer, an airline observer. “When people are worried about the future, they tend to spend less money. They don't know how the investment will be maintained or whether they will work in six months.
In March, analysts at Bank of America discovered that domestic travel had started late in 2025.
It remains to be seen how this will be deployed with airfares as airlines trim capacity to maintain prices. This week, Delta said it would reduce capacity growth planned for the second half of the year.
“Overall, we expect prices to go down and we'll see more empty seats,” Sumers said.
As low-income households reduce discretionary costs, low-cost airlines are the most vulnerable, said Jonathan Kletzel, transportation and logistics leader at business consultant PWC. “Discount carriers will feel this more,” he said.
Hotel Hurdles
Hotels are threatened with higher operating costs as buyers of everything from sheets and furniture to electronics and wine rises import prices.
“We've seen a lot of people who have been working hard to get into,” said Becky Lu Rastres, an associate professor at the Department of Tourism, Events and Sports Management at Indiana University Indianapolis.
Additionally, the industry that relies on immigrants and visa-holding workers faces a workforce shortage that could be linked to the administration's strict attitudes on immigration, said David Shelwin, professor of hospitality, talent and law at Cornell University's Nolan Hotels Bureau.
In the past, hotels have hanging low rates to attract guests, but if staff is limited to manage a full house, they may accept low occupancy to maintain the rates.
Jan Freitag, national director of hospitality analysis at commercial real estate analyst company Costar Group, said hotel renovations and new construction would likely slow down as costs rise.
Domestic travel benefits
In past recessions, Americans tended to make reservations to get closer to their homes and get closer to departures.
In a survey of 1,000 adults conducted on April 3-5, MMGY Global, a marketing and communications agency, found that 83% of respondents still intended to travel.
The third was planning to get closer to the house. 29% said they would trade international destinations for domestic destinations. Also, 24% choose cheaper modes of transportation.
“At the very high end, you wouldn't be surprised if they continued traveling,” Costar's Freitag said.
Cruise in the sea with a break
Travel warnings from foreign governments related to recent detention at the US border, and boycotts of travel by Canadians stabbed by tariffs and calls, have become the 51st nation, threatening inbound international tourism, including cruises departing from US ports for the Caribbean.
“This will also affect the cruise industry,” said Vinod Agarwal, a professor of economics at Old Dominion University in Norfolk, Virginia.
Gordon Ho, professor of business administration and organization at the University of Southern California Marshall Business School and former chief marketing officer at Princess Cruises, said that Cruises offers more tariff protection than other travel industries and exempts import fees, so there is more tariff protection than other travel industries.
Cruise bookings also tend to occur months or years ago. It is still unclear how many passengers will cancel if the economic situation worsens.
“For those searching, there is a great opportunity for value in every few months in the travel industry trying to make up for lost international tourism,” Ho said.
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