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Trump's 25% tariffs spark recession fears; travel industry pivots to limit impact

Michael Pihach

03-04-2025 10:20 am

Michael Pihach

Michael Pihach is an award-winning journalist with a keen interest in digital storytelling. In addition to PAX, Michael has also written for CBC Life, Ryerson University Magazine, IN Magazine, and DailyXtra.ca. Michael joins PAX after years of working at popular Canadian television shows, such as Steven and Chris, The Goods and The Marilyn Denis Show.

This article was updated on Tuesday, March 4 at 11:02 a.m. EST.

U.S. President Donald Trump has officially unleashed a trade war on Canada as his long-threatened tariffs took effect at 12:01 a.m. EST on Tuesday (March 4).

Trump’s executive order hits Canada (and Mexico) with 25 per cent across-the-board tariffs, with a lower 10 per cent levy on Canadian energy.

It kickstarts a potentially-devastating conflict between two countries with linked economies, jeopardizing jobs and likely raising prices on both sides of the border.

Trump promised to impose tariffs in response to what he says is an unacceptable flow of illegal drugs and migrants into the United States.

Canada has repeatedly said tariffs will harm both economies, with Prime Minister Justin Trudeau, in a statement yesterday, calling the action "unjustified,” vowing swift retaliation.

A U.S. flag at Washington Monument. (Unsplash/Chris Hardy)

Last month, the Canadian government pledged to hit the U.S. with retaliatory 25 per cent tariffs on $155 billion worth of American goods coming into Canada. The plan was put on hold after Trump paused levying tariffs on Canada for at least 30 days, but it’s now back in motion.

Trudeau pointed out yesterday that less than one per cent of the fentanyl intercepted at the U.S. border comes from Canada. “We have worked relentlessly to address this scourge that affects Canadians and Americans alike,” he said.

That includes implememting a $1.3 billion border plan with new choppers, boots on the ground, more co-ordination, increased resources to stop the flow of fentanyl, and the appointment of a Fentanyl Czar.

Trudeau said Trump’s tariffs will lead to Americans paying more for groceries, gas, and cars, and potentially losing thousands of jobs.

“Tariffs will disrupt an incredibly successful trading relationship,” he said. “They will violate the very trade agreement that was negotiated by President Trump in his last term.”

A mid-year recession?

Ontario’s auto sector could be one of the first industries to feel the effect of Trump’s tariffs, reports say.

There are also serious concerns about how Canada’s economy in general will fare. According to Desjardins’ deputy chief economist, Randall Bartlett, Canadians can expect to enter a recession by the middle of this year.

Speaking to BNN Bloomberg on Monday (March 3), Bartlett said he and his team believe “it will be very difficult for the Canadian economy to not fall into recession” within a few months if tariffs are imposed.

“Ultimately, retaliatory tariffs are just going to exacerbate that and also lead to higher inflation, so it will provide a bit of a challenge for the Bank of Canada in terms of contending with a negative shock to gross domestic product (GDP) and at the same time, upward pressure on inflation,” Bartlett said.

Tariffs applied by the U.S. also have implications for the Canadian dollar, which will impact other things that Canada imports and re-imports from the U.S., he went on to say.

“Ultimately that puts upward pressure on domestic inflation to some extent,” he said.

It has also been suggested that Canada would need a pandemic-sized relief package to support struggling businesses and citizens who may lose their jobs because of the tariffs, reports the Financial Post.

“The ripple effect could be significant”

In January, PAX asked if the travel industry should be worried about Trump’s tariffs.

After all, Canada’s economic conditions directly affect disposable income and consumer spending, which, if severe enough, can have a negative impact on the travel industry.

At the time, Zeina Gedeon, CEO of Trevello Travel Group, told PAX that the Canadian travel industry is “at a crossroads.”

“A 25 per cent tariff could mean higher prices for everything from travel packages to cross-border shopping, potentially reducing the disposable income families have for vacations,” Gedeon said. “The ripple effect could be significant. Fewer trips to the United States, more cautious spending, less disposable income for travel, and a shift towards more budget-friendly travel options.”

At the same time, Gedeon said the situation presents an opportunity for advisors to promote domestic travel.

“It’s a time for collaboration and creativity, ensuring that travel remains a key part of Canadians’ lives, even in uncertain times. By focusing on what makes Canadian travel special, we can turn economic challenges into a chance to reinvent and reimagine travel,” she said.

Demand for U.S. travel dips

Meanwhile, more Canadians are second-guessing – and downright cancelling – travel to the United States.

Amid calls to “buy Canadian,” along with requests from politicians to cancel trips to the U.S., and the weak loonie, many are rethinking where they should spend their travel budgets – a movement WestJet’s CEO Alexis von Hoensbroech acknowledged recently.

Ever since Trump’s tariff announcements, WestJet’s sales from Canada into the U.S. have “dropped very significantly,” von Hoensbroech told reporters last month.

Air Canada plans to reduce capacity in Florida, Las Vegas, and Arizona starting in March. (Pax Global Media/file photo)

Air Canada is also monitoring the market. During an earnings call last month, Executive Vice President of Revenue and Network Planning and President of Cargo Mark Galardo said the airline would reduce capacity on select routes to Florida, Las Vegas, and Arizona starting in March, citing the ongoing Canada-U.S. tariff dispute and the weak dollar.

Air Transat and Porter Airlines have also reduced their U.S. capacity, PAX confirmed last week. However, both airlines are calling the adjustments normal, asserting that they’re still seeing demand for U.S. destinations from Canada.

“Anywhere but the U.S.”

Amra Durakovic, a spokesperson for Flight Centre Travel Group Canada, said her company’s travel advisors are hearing loud and clear from customers that U.S. travel is a no-go right now.

“We are definitely seeing a shift in Canadians’ travel plans,” Durakovic told the Vancouver Sun last month. “They’re sending a powerful message right now by directing their tourism dollars elsewhere.”

Some of the cancellations, Durakovic said, were big-ticket itineraries costing anywhere between $10,000 to $30,000.

She noted a family that was booked for an Arizona junket to the canyons. Now, they’re going to Portugal. Cruise passengers that were scheduled for sailings that visit U.S. ports of call are now switching to the Mediterranean, she said.

“Canadians are definitely rebooking,” said Durakovic. “The sentiment I’m hearing is ‘anywhere but the U.S.’ It’s a moment of solidarity and consumer advocacy.”

Consumers are “doing their research”

In a statement to PAX Tuesday morning, Reese Morash of Halifax-based agency TravelBug Travel Group said consumers are now “doing their research” to figure out which cruise lines are U.S. companies.

He said his agency is trying to shift people to Viking “as they have no American affiliation.”

Reese M. Morash and Kelly Neonakis-Morash, co-owners of Halifax, N.S.-based TravelBug Travel Group. (Supplied)

But in most cases, the impact isn’t immediate due to the way travel is booked and processed.

“The majority of our bookings are always two years out, so currently we have cruises and some land groups running this year, but because they were booked two years ago, they are fully paid and will still be happening – unless clients have insurance to protect them if they cancel,” he said.

Morash said he still has several cruises and land groups booked with deposits for 2026 and 2027. “We are optimistic that the tariff shitshow will not last that long and that those bookings will happen,” he said.

The majority of down south bookings are also fully paid, “so we have not experienced any cancelations.”

Consumer confidence tested

Laurie Keith, CEO at Ontario-based Boutique Travel Services, believes the ripple effect of Trump’s tariffs will “definitely have an impact on the economy, including the travel industry.”

“We are already witnessing billions of dollars in cancelled trips by Canadians to south of the border destinations,” Keith told PAX on Tuesday. “For now, our clients are seeking alternative destinations, but I feel that as consumer confidence begins to dwindle, job losses start to come into effect, and the cost of living increases due to these tariffs, we will be facing another arduous time as a nation.”

Keith is hoping Ottawa implements a plan to support business and citizens that are impacted. “Hopefully this will minimize the damage, but I feel it would be naive to think that our industry will come out of this unscathed,” she said.

Limit the negative impact

Other travel advisors PAX spoke to are trying to limit the impact.

Last month, Jamie Angus-Milton, a partner at Uniglobe Carefree Travel in Saskatoon, Saskatchewan said her customers are requesting Mexico as an alternative, as well Europe, Australia and New Zealand.

She believes that with any major political or economic change, there is potential for disruption and impact to the travel industry.

“However, the travel industry is nothing if not versatile and accustomed to change,” she said. “I believe we can limit the negative impact of the tariffs by asking our travellers to ‘travel with intention’ and choose Canadian destinations and/or Canadian travel suppliers as much as possible when travelling.”

mie Angus-Milton, a partner at Uniglobe Carefree Travel. (Supplied)

“Instead of not travelling, we believe travellers will travel differently, and it’s up to us to give them options to do so.”

Ontario-based Michelle Gaudet of Inspired Travel Adventures & Women's Wellness Journeys finds the situation frustrating, but also understands how her clients feel.

“Some travellers are choosing not to support travel to the USA right now, and as always, I respect and support my clients in whatever choice feels right for them,” Gaudet told PAX recently.

As a travel advisor, she feels her role is to help clients look at alternatives and perhaps help them “discover exciting new places they may not have considered before.”

Preparing for the worst

McKenzie McMillan, a luxury consultant and supplier relations manager at The Travel Group, based in B.C., said his clients are looking at Mexico and Iceland as alternatives to the U.S. “due to their relatively close proximity to Canada.”

“There’s no doubt both will feel benefits from Canadian travellers,” McMillan told PAX in a recent interview.

But the anxiety of a possible recession or financial downturn is real.

“We’ve seen in the past that in a recession or financial downturn, spending on ‘luxuries’ like travel can often be the first to take a hit, so we definitely are preparing for the possibility of a downturn in business heading into the busy summer season,” McMillan said.

An opportunity to shine

The shift in spending is expected to hit U.S. economies hard.

Last month, the U.S. Travel Association, which represents all components of the U.S. travel industry, revealed that a mere 10 per cent reduction in Canadian visitation could result in two million fewer visits, including $2.1 billion (USD) in lost spending.

Speaking to PAX weeks back, Jane Clementino, senior vice-president and general manager of TRAVELSAVERS Canada, said the tariff situation, however severe it may be, presents an opportunity for travel advisors “to shine” as they share their knowledge and demonstrate the value of their role.

“Advisors are equipped to provide customers with sound advice and counsel given the circumstances,” Clementino said. “Things like great trips that offer the best value, and making sure clients fully understand cancellation and refund policies and buy insurance so they’re protected.”

“Our advisors are conscious of consumer concerns and desires when it comes to vacation planning. They can help them reconsider choices and budgets as appropriate, keeping an eye on pricing, and sharing lots of options.”

CATO’s call to action

In a statement Tuesday, the Canadian Association of Tour Operators (CATO) proclaimed that the “tariff war is on,” telling travel and tourism professionals that the “time to act is now.”

"The tariffs imposed by the Trump administration have already caused significant damage, not just in the tourism industry, but across every economic sector,” CATO wrote in a news release. “As for the vital tourism sectors of both the United States and Canada, the costs are being felt across the industry, from hotels and restaurants to travel agencies, tour operators, and transportation services. Thousands of jobs are at risk, and without swift and decisive action, the consequences will only worsen.”

The association goes on to say that Trump’s tariffs “threaten not only the jobs of workers on both sides of the border but also the very fabric of the relationship that has stood the test of time.”

“The ripple effect of these trade barriers is already disrupting the flow of tourists, leading to fewer cross-border visits, lost revenue, and a decline in the economic vitality of tourism-related sectors,” CATO said. “It’s time for us to make our voices heard, and louder.”

CATO is calling on the industry to stand up against Trump’s “damaging tariffs” by publicizing the impact they will have on tourism, educating consumers and colleagues, using social media and industry forums to speak out, joining forces with associations and advocacy groups that are working to reverse the tariffs, engaging with policymakers to express concerns and supporting tourism-friendly policies.

“Remind lawmakers that tourism is not a luxury – it is a critical economic engine that creates jobs and drives prosperity for millions of people,” CATO said.

“The U.S.-Canada tourism industry represents more than just a trade relationship – it represents a deep friendship and partnership that has existed for hundreds of years. The time to act is now. The damage is real, but it’s not too late to turn the tide. Together, we can make a difference.”

The Association of Canadian Travel Agencies and Travel Advisors (ACTA) also issued a statement Tuesday, saying it is "extremely concerned" about Trump's tariffs.

"If these tariffs are not short-lived the direct impact on Canadians' purchasing power will significantly harm travel advisors as their clients delay or cancel travel plans due to financial constraints," ACTA said.

Click here to read more about ACTA's advocacy and response plan.

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