With President’s Trump decision to defy opposition from his own party and proceed with stiff tariffs on imported steel and aluminum in the name of protecting U.S. industry and national security, the question of a trade war is once again relevant. In response to the new tariffs, China announced that it’ll take “effective measures to firmly safeguard its legitimate rights and interests.” The United States happens to run a significant tourism exports surplus with China, and Chinese curbs on tourism to the United States would most certainly mean a multi-billion dollar loss for the U.S. economy.
Even so, such a move seems unlikely. And this despite China’s clear willingness to use its tourists as a diplomacy tool with countries like South Korea, the Vatican, and Taiwan—not to mention along its so-called Belt and Road. But no, Chinese tourism will not be a casualty of a trade war, especially at this point in time.
There are many good reasons not to fear a trade war between China and the United States would spill over into tourism
There are many good reasons not to fear a trade war between China and the United States would spill over into tourism. For starters, retaliatory action tends to punish the ruling party for highest political impact. In the case of the GOP and Trump’s base, that would mean attempting to stifle exports from red states and swing states won by Trump in the 2016 election. To that end, the EU has proposed to go after product categories that are predominantly exported by such states, as well as states with ties to leading figures in the GOP. The main beneficiaries of Chinese tourism in the United States, however, are predominantly democratic states such as California, Illinois, Massachusetts, and New York. It goes without saying that a tourism ban would only make a very small dent in the economies of most states that were won by Trump.
But it also goes against Chinese business interests. Chinese tourism in the United States isn’t only important to U.S. stakeholders, but also all the Chinese tour agencies, tour companies, airlines, and even payment facilitators that are integral parts of Chinese visits to the United States. Even U.S.-based tour operators that focus on Chinese tourists are often owned by larger organizations in China.
A United States Tourism ban would be damaging for Chinese businesses
Arguably, however, is that so was also the case for South Korea, which nevertheless remains the subject of a Chinese tourism ban. On the other hand, and unlike the U.S. economy, Chinese consumption constitutes a much larger share of GDP and consumer spending in South Korea. In South Korea, a ban on group tours was felt, but in the United States, the effect on the general economy would be much more limited. That might not be much consolation for tourism businesses in the United States that depend on Chinese tourist revenue, but it does speak for why China isn’t likely to consider retaliating with tourism in the first place.
Now, even if China were to implement a South Korea-style tourism ban on group travel to the United States, the effects would be less devastating for the tourism industry than it might seem. Higher-revenue customer segments such as independent travelers, business travelers, and VFR (visiting friends and relatives) travelers would most likely be completely unaffected by a ban. In South Korea and Taiwan, arriving Chinese independent travelers actually rose after both found themselves at the receiving end of Chinese tourism retaliation.
Cracking down on Chinese tourism to the United States as a whole is completely out of the question
Cracking down not only on group travel but on Chinese tourism to the United States as a whole is also completely out of the question. There have never been more Chinese businesses that operate in the United States, and there have never been more U.S. businesses that operate in China, so cracking down on all travel between China and the United States would be a disastrous move with effects far more severe than what constitute a just retaliatory action—not least for Chinese businesses. Not even at the height of THAAD tensions between China and South Korea did any such move appear within the realm of possibility. As part of the (potentially) first round in a Sino-American trade war, it’s out of the picture.
On a final note, potential Chinese tariffs on U.S. luxury goods would only result in one thing: increased demand for travel to the United States. If tourism stakeholders in the United States should hope for one thing, it’s Chinese retaliation against imports of U.S. manufactured consumer goods. If there’s anything that has proven to drive Chinese tourism to a destination, it’s the prospect of getting a good deal on attractive products. Just ask post-Brexit referendum Britain.