The Economic Impact of the U.S. Travel Ban on Europe

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President Trump in an address to the nation last night announced all travel from Europe (except Britain) to the U.S. will be suspended for 30 days starting on Friday. This doesn’t apply to American citizens or permanent residents who undergo screenings and will not impact trade and cargo, according to hurried clarifications made later by Homeland Security. Only foreign nationals physically present in Europe in the last 14 days will not be allowed on U.S. soil, but the speech sent shockwaves through global markets. European airline shares plunged, and the price of oil fell 4%. 

The Trump administration has also deferred income tax payments and announced that copayments for coronavirus tests will be waived. Small businesses will be provided low-interest loans, and the Small Business Administration program could receive a $50 billion funding boost. There’s still no update on the payroll tax cut, which was criticized by Democrats, and he did not discuss additional health measures, like more testing kits. 

“This action will hit U.S. airlines, their employees, travelers and the shipping public extremely hard,” said Airlines for America President and CEO Nicholas E. Calio in a statement released that same night. According to travel industry analyst Cirium, the 30-day ban impacts nearly 17,000 flights and 4.8 million seats, and the worst hit U.S. airlines will be American Airlines, Delta Air Lines and United Airlines. The IATA has predicted that the coronavirus outbreak will cost North American airlines $21.1 billion in revenue this year, but that was before yesterday’s announcement. 

The ban will also completely halt the flow of European tourists to the U.S.. According to U.S. Travel Association economists, 850,000 international visitors flying from Europe (excluding the U.K.) entered the U.S. in March of 2019, accounting for about 29% of total overseas arrivals to the U.S. These visitors spent approximately $3.4 billion in the U.S.

“Temporarily shutting off travel from Europe is going to exacerbate the already-heavy impact of coronavirus on the travel industry and the 15.7 million Americans whose jobs depend on travel,” said U.S. Travel Association President and CEO Roger Dow. “We have and will continue to engage Congress and the administration on policy steps that are necessary to ensure that travel employers—83% of which are small businesses—can keep the lights on for their employees.”

Tourism Economics said the U.S. travel and tourism industry could lose at least $24 billion in foreign spending this year as more visitors are lost than even in the aftermath of the 9/11 terrorist attacks. Again, this is data from before Trump’s speech. According to CNBC, the travel and tourism industry is asking the administration for tax credits for employee retention, deferment of quarterly tax payments and the ability to carry back net-operating-losses.  

About 40 million visits (50.1% of total) are made to the U.S. every year from overseas, which does not include Mexico and Canada. The top 10 overseas markets account for 58% of all overseas visitors, and they include China, South Korea, Germany, France and Italy, according to the U.S. Travel Association.

Source: U.S. Travel Association.

Source: Investopedia

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