At midnight on Thursday 31JUL, Trump signed into effect massive global tariffs including an increase on Canadian goods to 35%, up from the previous 25%.
The United States’ decision to sharply raise tariffs effective 07AUG, is intensifying strains on an already battered US-Canada travel economy. Trade tensions and reciprocal measures have left cross-border travel and tourism in a precarious state, threatening billions of dollars in economic activity.
A tourism coalition recently warned of “historic uncertainty” in Canada-US tourism.
”The economic impact has been immediate and measurable,” said the Beyond Borders Tourism Coalition, an alliance of US and Canadian tourism, trade, and association stakeholders. In some cases, cross-border travel activity in Canada is down as much as 70%, the group said.
In the first half of 2025, travel between the U.S. and Canada had already plummeted: vehicle crossings into the U.S. by Canadians in May fell 38.1%, and air travel dropped 24.2% over the previous year, according to Stats Canada. Although June was showing some signs of improvement.
And this is before the latest tariffs were imposed.
Just past midnight on Friday, Prime Minister Mark Carney released a statement on X.
“While the Canadian government is disappointed by this action, we remain committed to [the Canada-U.S.-Mexico Agreement, which is the world’s second-largest free trade agreement by trading volume,” the statement read.
Travel Economy Under Siege
Earlier this year, tourism agencies estimated that a mere 10% decrease in Canadian travel to the U.S. could wipe out $2.1 billion in spending and threaten up to 140,000 American tourism jobs.
Air Canada’s second quarter profits were down sharply from last year as the airline battled a double digit drop in US flight revenue.
According to the Financial Post “shares in Air Canada plunged Tuesday after Canada’s largest airline reported second-quarter net income had fallen by more than half as it grappled with a “challenging environment” that included macroeconomic uncertainty and a decline in travel to the United States.”
The effects on border communities, where hospitality and small retail businesses reliant on cross-border shoppers, has been reported on for months as an entire summer season is lost.
The Yale Budget Lab estimates Canada’s real GDP could shrink by as much as 2.1% as a result of the US tariffs and Canadian countermeasures, compounding the pain to an already strained tourism industry.
ACTA’s outgoing president, Wendy Paradis, referred to the combined impact of tariffs and political tensions as “worse than the pandemic” on travel businesses when speaking with Open Jaw.
Paradis’ statement is prophetic as it took years to climb out of the effects of the global pandemic. However, as health improved, so did travel. The long term fallout from imposed tariffs based on the whims of an unpredictable leader is anybody’s guess.
