Another Casualty of US-China Trade Tussle: Tourism

The US-China trade dispute has now begun to hit some of the other sectors of the two economies. On June 15, 2018, President Trump said the US would impose tariffs worth 50 billion USD on Chinese imports. A week later, on January 22, 2018, the US Department of State came up with a Level 2 Travel Advisory warning “Exercise Increased Caution” while traveling to China.¹ Since then the US and China have imposed tariffs on each other’s imports unsettling financial markets with the US recently initiating the process of further imposing duties worth 200 billion USD. ²

The Chinese Embassy in Washington D.C has recently released a travel advisory warning its citizens traveling of the worsening law and order situation in the US. The various measures taken by the US Government to prevent further terror attacks also pose difficulties for Chinese tourists traveling there.³

The tourism industry currently contributes 7.6 trillion USD to the world economy, more than any other sector. The World Travel and Tourism Council have predicted that in the next decade one of four jobs in the world would be in this sector. The measuring stick of any country’s economy doing well and getting richer is when its people go abroad for vacations and start spending. Chinese tourists are out-spending every other nation be it on eating, shopping or traveling abroad. According to the United Nations World Tourism Organisation, Chinese spend about a fifth of their money compared to other outward bound tourists all over the world, which is twice the amount paid by the next biggest spenders that are tourists from the United States. ⁴

What is interesting to note is that the Chinese Government has as yet issued passports to five percent of its population while around 10 million travel documents are issued every year.⁵ President Xi in September 2015 announced that both the US and China would hold “year of tourism” for each other in 2016. In the same year, while the number of US citizens traveling to China was about 1.66 million, 2.17 million Chinese visited the US, which was up by 15.5 percent compared to the number of visitors from China to the US in 2015.⁶ The number of Chinese visitors is expected to grow up to 5.7 million by 2021, according to the U.S Department of Commerce. Tourism is a rapidly growing contributor to the US and Chinese Economies. In the US, it supports 2.2 million jobs and contributed 35 million USD in 2016 to the economy, outdoing the 2015 figure by three billion USD. ⁷

The Chinese Government has planned to invest two trillion Yuan (302.25 billion USD), according to the 13th Five Year Plan and expects the sector to contribute around 12 percent of its total Gross Domestic Product (GDP). ⁸ The contribution to Chinese GDP from travel and tourism in 2017 was 9.1 percent; it is expected to grow to 11 percent by 2027, which will lead to exponential job growth of 3.5 percent per annum by 2027 in the travel and tourism sector in China.⁹

In the US, the travel and tourism sector amounted to 7.7per cent of the total GDP in 2017, and by 2028 the industry will contribute 8.4 percent of the total GDP of the US economy.¹⁰ China has banned group tour packages in recent times, the recent one being to South Korea following the deployment of Terminal High Altitude Area Defence (THAAD) that led to Chinese tourists traveling to South Korea falling by half.¹¹ On the surface, this might not seem like an issue that needs focus since the Chinese tourists who visit the US are wealthier and, more importantly, travel independently. In 2016, the 2.97 million Chinese tourists to the US ended up spending 33 billion USD. Although, a part of the 33 billion USD includes disguised real estate purchases, purchases of insurance, among other things.¹²

The US is already experiencing a slump as far as visitors are concerned. US travel ban on the Middle East and President Trump’s comments against Mexicans have led to a drop of 2 percent in tourists coming to the US. Meanwhile, to deter US tourists from traveling to China, the State Department has issued health advisory warnings as unexplained sounds led to “dizziness, headaches, tinnitus, fatigue, cognitive issues, visual problems, ear complaints and hearing loss, and difficulty sleeping” among many of its Consulate staff in China. The unexplained sounds and the consequential illness after that has led to the US evacuating diplomats and their families from Guangzhou, China.¹³

While the travel and tourism sector might not have been the focus of the US trade tariffs on Chinese products and goods but the consequences might affect in both countries. Millions are dependent on this sector for their livelihood, and the projected positive growth rate of this sector might take a hit because of the tariffs and the travel advisories. Beijing does have the capacity and the capability to ban travel to the US as they did with South Korea but that would be at a high cost. The US also needs to be mindful that around 50 million Chinese would be soon traveling around the world¹⁴, from which the US tourism industry might not be able to take full advantage.

The recent sonic attacks on the US consulate, President Trump’s rhetoric, and the negative travel advisories might put a lot of undue pressure on the travel and tourism sector in both countries and affect millions of jobs which they sustain directly and indirectly, and cause significant changes in plans of future investments of both countries.

References

1. China Travel Advisory. (2018, January 22). Retrieved July 13, 2018, from https://travel.state.gov/content/travel/en/traveladvisories/traveladvisories/china-travel-advisory.html [3]
2. Fleming, S., Reninson, J., & Hornby, L. (2018, July 11). US to impose tariffs on $200bn of Chinese imports. Retrieved July 14, 2018, from https://www.ft.com/content/fd907b80-8493-11e8-96dd-fa565ec55929 [4]
3. Remind the summer vacation in the United States to travel to Chinese citizens to pay attention to the following matters. (2018, June 28). Retrieved July 13, 2018, from http://www.chinaembassy.org/chn/lszj/zytz/t1572411.htm [5]
   The original document is in Mandarin.
4. Majendie, A. (2018, February 11). Chinese Tourists Are Taking Over the Earth, One Selfie at a Time. Retrieved July 13, 2018, from https://www.bloomberg.com/news/features/2018-02-11/chinese-tourists-are-taking-over-the-earth-one-selfie-at-a-time [6]
5. Ibid
6. Jei, S. (2017, January 11). Record number of Chinese, US tourists visit each other's country in 2016. Retrieved July 13, 2018, from http://www.globaltimes.cn/content/1028161.shtml [7]
7. Shilong, Y. (2016, April 21). U.S. wilderness becomes new magnet for Chinese tourists. Retrieved July 13, 2018, from http://www.xinhuanet.com/english/2017-11/16/c_136755287.htm [8]
8. Ibid 5
9. Travel and Tourism, Economic Impact, 2018, China. (2017, March). Retrieved July 13, 2018, from https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2017/china2017.pdf [9]
10. Travel and Tourism, Economic Impact, 2018, United States (Rep.). (2018, March). Retrieved July 13, 2018, from World Travel and Tourism, Economic Impact, 2018 website: https://www.wttc.org/-/media/files/reports/economic-impact-research/countries-2018/unitedstates2018.pdf [10]
11. Jennings, R. (2018, March 04). Why It Hurts Less Now As China Punishes South Korea With Tourism Cuts. Retrieved July 13, 2018, from https://www.forbes.com/sites/ralphjennings/2018/03/04/china-keeps-punishing-south-korea-with-tourism-cuts-for-now/#9affa66366c4 [11]
12. Hindsale, M. (2018, January 22). Sino-American Trade War Would Damage Tourism, but That's Not What Matters. Retrieved July 13, 2018, from https://jingtravel.com/sino-american-trade-war-would-damage-tourism-but-thats-not-what-matters/ [12]
13. Denyer, S. (2018, June 08). U.S. Embassy warns Americans in China about mystery sonic illness. Retrieved July 13, 2018, from https://www.washingtonpost.com/world/asia_pacific/us-embassy-warns-citizens-in-china-about-mystery-sonic-illness/2018/06/08/dda66954-6adc-11e8-bbc5dc9f3634fa0a_story.html?utm_term=.c7718a986754 [13]
14. Dodwell, D. (2018, March 23). Mr Trump, do the sums on tourism before starting a China trade war. Retrieved July 13, 2018, from https://www.scmp.com/business/global-economy/article/2129866/mr-trump-you-ponder-china-trade-war-count-us33-billion [14]

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