Tourists no longer want to come to the United States, and it isn’t just hurting hotel bookings. The decline is starting to show up in oil-demand data, according to J.P. Morgan.
Travel to the U.S. fell 11.6% in March from the year before, according to the International Trade Administration. And car trips by Canadians to the U.S. fell 32% in March, after dropping 23% in February. Goldman Sachs has estimated that the drop in tourism could reduce GDP by as much as 0.3%, or about $90 billion, in a worst-case scenario.
Travel experts say the Trump administration’s combative rhetoric about other countries, and negative stories about airport security measures are to blame.
“Policies and pronouncements from the Trump administration have contributed to a growing wave of negative sentiment toward the U.S. among potential international travelers,” a recent Oxford Economics report said.
The decline in tourism appears to be hitting oil demand in the U.S. Fuel use is dropping in America even as it’s rising elsewhere in the world, according to the J.P. Morgan analysis, led by Prateek Kedia. Daily international flights outside the U.S. hit a new all-time high last week, 7% above 2019 levels.
Meanwhile, U.S. gasoline demand has dropped 3%, or 230,000 barrels per day, over the past three weeks, according to J.P. Morgan. Some of that appears to be due to the drop in Canadian tourists coming into the U.S.
“We believe this reduction in travel activity has spread into April, feeding into decreased U.S. gasoline demand,” Kedia wrote. The decline in U.S. fuel use is starting to hurt global numbers. Global oil demand appears to have fallen by about 150,000 barrels per day as of mid-April, she wrote.
The demand shock is hurting prices. West Texas Intermediate crude, the U.S. benchmark, is down 11% this year to $64 per barrel. J.P. Morgan now expects prices to fall to $54 by the end of the year.
Few analysts have forecast an outright year-over-year decline in oil demand this year, but most have been reducing their estimates in recent weeks as tariffs begin to slow the economy down. The travel slowdown should only exacerbate the trend.
Write to Avi Salzman at avi.salzman@barrons.com