The U.S. trade war with China is chilling tourism from that country, dampening a major revenue stream for hotels, restaurants and retailers just as the summer season gets in full swing.
Last year, when the trade war began, the number of visitors to the U.S. from China fell 5.7% to 3 million, the first decline in 15 years, according to the National Travel and Tourism Office. Those visitors had totaled 160,000 in 2003 and had climbed every year since.
So far In 2019, the picture isn’t any brighter for Chinese tourism. Chinese travel to the U.S. fell another 2.4% the first three months compared with the same period a year ago, according to Tourism Economics, a research firm that studies the tourism industry
“Based on current trends, we expect no growth from China in 2019 if the trade war is resolved soon,” says Adams Sacks, president of Tourism Economics. “If it persists, then further declines are likely.”
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The trend is a concern for American businesses because Chinese tourists tend to splurge, making up an outsize share of tourism revenue. China’s 3 million visitors last year ranked fifth, well behind Canada’s 21.2 million. Yet their $36.4 billion in outlays ranked at the top, far outpacing Canada’s $22.1 billion.
Chinese tourists stay an average 18 days and spend an average of almost $7,000 per trip — about 50% more than other international tourists to the U.S., according to the U.S. Travel Association.
Here’s why many Chinese tourists are skipping the U.S.:
The Trump administration has slapped a 25% tariff on $250 billion in Chinese imports and is threatening to impose a similar levy on the remaining $300 billion in shipments from China. China has retaliated with duties on $60 billion worth of U.S. exports to that country.
“The conflict could shift Chinese travel demand away from the U.S.,” Sacks says.
Many Chinese tourists are staying away as they adopt a more hostile view of the U.S. and hear a drumbeat of negative messages from China’s government.
Earlier this year, the Chinese government asked the country’s state-run companies to avoid business trips to the U.S., according to Bloomberg and Reuters. This month, China’s Ministry of Culture and Tourism issued a travel warning telling tourists to beware of shootings, robberies and high medical costs in the U.S.
China’s state-run media outlets also have been posting messages to arouse citizens’ animosity toward the U.S.
Hongyan Chang, 36, who lives in the city of Dalian in China, says she canceled the family trip to the United States because she feels the country is China’s enemy. “America is trying to hurt us. Why should I spend the money over there?”
“This leaves patriotism or, put differently, antipathy toward the U.S. as a main reason that travel had shifted from growing more than 20% per year over a decade to declining in 2018,” says Sacks of Tourism Economics. “While no formal limits have been placed on travel, Chinese government warnings and statements regarding the U.S. are having a chilling effect.”
China’s weaker economy
China’s economic growth has slowed since last year, largely because of the trade war but also for other reasons. Consumer spending has fallen.
Chinese citizens have written on Weibo, a Twitter-like service, that they feel unwelcome in the U.S. because Chinese applicants for a visa are required to list their social media accounts for the past five years under a State Department policy that began this month.
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Several key industries are feeling the effects:
Li Li, the owner of a large New York City-based travel agency, LLL Travel, books flights and provides visa application and tour services for Chinese visitors. He says he has traditionally sold 1,000 airline tickets a week to passengers and other travel agencies, but that figure has dropped to 600 to 700.
Sixty percent of Li’s Chinese clients are businessmen and government officials from Beijing, Shanghai and Xian who come to the U.S. for business tours and training, but also to shop and do sightseeing. Li books buses, drivers and tour guides and makes restaurant reservations for them, which generates nearly half his revenue.
Panda Gourmet, which provides Sichuan and Shannxi style food and snacks, is one of the most popular restaurants for Chinese tourists in Washington D.C. In the past few years, at least three Chinese tour groups (around 150 people) visited the restaurant every month and brought in considerable revenue.
But since 2018, 90% of the business from Chinese tour groups has disappeared,” said Ah Mei, the restaurant’s operator. In the first half year of 2019, no tour group visited. Panda Gourmet is now focusing on local customers instead of Chinese tourists.
Tiffany & Co., the American luxury jewelry retailer, said this month that purchases by tourists in the most recent quarter fell 25% from a year earlier. The decline was “even sharper for Chinese tourists,” Alessandro Bogliolo, Tiffany’s chief executive officer, said on a conference call.