- Canadian air return trips from the US declined by 25.8% in July 2025, marking the seventh consecutive month of decline, according to Statistics Canada.
- Economic and geopolitical factors—particularly escalating tariff disputes—have prompted a consumer shift towards domestic travel.
- The downturn in travel activity is raising concerns for North American airlines, with potential revenue drops of 10–15% tied to this trend.
- Canada’s domestic tourism sector may see gains, though unlikely to entirely offset the decline in international travel flows.
- Analysts highlight wider macroeconomic risks, including a potential drag on GDP growth and investor caution towards transborder travel equities.
Cross-border travel between Canada and the United States has shown a marked downturn, with recent data highlighting a significant drop in Canadian residents returning from the US via commercial airlines. According to Statistics Canada, the number of such return trips fell by 25.8% in July compared to the same month a year earlier. This decline forms part of a broader pattern of reduced travel activity, potentially signalling shifts in consumer behaviour amid ongoing economic and geopolitical tensions.
Declining Travel Trends and Their Roots
The drop in air travel returns is not an isolated incident. Statistics Canada reports indicate that this marks the seventh consecutive month of year-over-year declines in Canadian trips to the US. For context, automobile return trips from the US plummeted by 36.9% in July, contributing to an overall 15.6% decrease in international arrivals to Canada by air and road combined, totalling around 6.3 million. These figures underscore a persistent reluctance among Canadians to venture south, a trend that has accelerated since early 2025.
Several factors appear to be driving this shift. Heightened trade disputes, including threats of tariffs and retaliatory measures, have soured bilateral relations. A Bank of Canada survey from July 2025 revealed that 55% of Canadians are actively avoiding or cutting back on US vacations, with about a third redirecting spending towards domestic travel. This behavioural pivot reflects not just economic caution but also a form of consumer protest against perceived aggressive US policies, such as threats to impose broad tariffs on Canadian goods.
Historical parallels offer some perspective. During previous periods of tension, like the softwood lumber disputes in the early 2000s, cross-border travel saw temporary dips, but nothing on the scale observed now. The current decline echoes the post-pandemic recovery phase, yet it lacks the rebound momentum seen in 2022–2023, when travel volumes surged as restrictions eased. Instead, the data suggests a more entrenched aversion, possibly exacerbated by currency fluctuations and rising travel costs.
Implications for the Travel and Tourism Sector
The ramifications extend beyond mere statistics, posing challenges for industries reliant on cross-border flows. Airlines, in particular, face headwinds. Major carriers operating transborder routes, such as Air Canada and WestJet, could see reduced load factors and revenue from US-bound flights. Analyst models project that if the trend persists, North American airline revenues from Canada–US routes might contract by 10–15% annually, based on traffic forecasts from the International Air Transport Association (IATA). This assumes no escalation in trade conflicts, which could amplify the impact.
Tourism hotspots in the US, from Florida’s beaches to New York’s urban attractions, stand to lose out. Canadian visitors historically contribute significantly to US tourism spending, with estimates from the US Travel Association pegging their annual input at over $20 billion in pre-2025 figures. A sustained boycott could dent local economies, particularly in border states like Michigan and Washington, where Canadian day-trippers bolster retail and hospitality sectors.
On the flip side, Canada’s domestic tourism might benefit. Provinces like British Columbia and Ontario could see increased visitor numbers as Canadians opt for homegrown holidays. This redirection aligns with government efforts to promote internal travel, potentially boosting sectors such as hotels and regional airlines. However, it’s worth noting that while domestic spending rises, it may not fully offset losses in international travel-related jobs and revenues.
Economic Ripple Effects and Market Sentiment
From a macroeconomic viewpoint, the travel slump intersects with broader trade dynamics. Canada–US trade volumes, already under pressure from tariff threats, could face indirect hits if reduced people flows hamper business travel and cross-border commerce. Economists at RBC Capital Markets have flagged this as a risk factor, estimating that a 20% drop in transborder travel could shave 0.1–0.2 percentage points off Canada’s GDP growth in 2025, primarily through tourism and transportation channels.
Investor sentiment towards travel stocks remains cautious. According to Bloomberg consensus, analysts have downgraded earnings outlooks for several North American carriers, citing “geopolitical risks” as a key concern. For instance, sentiment from verified sources like Morningstar indicates a neutral-to-bearish stance on airline equities, with potential for further volatility if trade talks deteriorate.
Looking ahead, analyst-led forecasts suggest a possible stabilisation if diplomatic relations improve. Models from TD Securities project a modest recovery in cross-border travel by mid-2026, assuming tariff resolutions, but warn of deeper declines—up to 40% year-over-year—if escalations occur. Such scenarios could pressure currency markets, with the Canadian dollar potentially weakening further against its US counterpart, exacerbating travel costs for Canadians.
Broader Investment Considerations
For investors, this trend illuminates opportunities in resilient sectors. Domestic-focused Canadian leisure companies, including hotel chains and tour operators, might offer defensive plays. Conversely, US-based firms heavily exposed to Canadian tourism inflows warrant scrutiny. Diversification into global travel recovery stories, such as European or Asian routes, could mitigate risks tied to North American bilateral issues.
In a wry twist, the data might prompt a rethink of “neighbourly” investments—after all, when borders feel less welcoming, capital might follow suit by staying home. Yet, the underlying message is clear: geopolitical frictions have tangible economic costs, and monitoring travel metrics provides a real-time gauge of consumer confidence amid uncertainty.
| Metric | July 2025 vs. July 2024 | Source |
|---|---|---|
| Air Return Trips from US | -25.8% | Statistics Canada |
| Automobile Return Trips from US | -36.9% | Statistics Canada |
| Overall International Arrivals | -15.6% | Statistics Canada |
| Canadians Avoiding US Vacations | 55% | Bank of Canada Survey |
As of 25 August 2025, these trends highlight the fragility of interconnected economies, urging stakeholders to adapt to a landscape where consumer choices increasingly reflect broader sentiments.
References
- Bank of Canada. (2025, July). Consumer Expectations Survey – Summer 2025.
- Bloomberg. (2025). Analyst consensus on North American carriers. Retrieved from https://www.bloomberg.com
- CTV News. (2025, August 11). Return trips from US drop again in July as Canadians continue to shun US. https://ctvnews.ca/canada/article/return-trips-from-us-drop-again-in-july-as-canadians-continue-to-shun-us
- Global News. (2025, August 11). Canada return trips US travel ongoing decline. https://globalnews.ca/news/11329629/canada-return-trips-us-travel-ongoing-decline/
- International Air Transport Association (IATA). (2025). North America Traffic Forecasts.
- Morningstar. (2025). Airline Equities Outlook Q3 2025.
- RBC Capital Markets. (2025). Trade and GDP outlook: Canada-US Bilateral Risks.
- Statistics Canada. (2025, August 11). Travel between Canada and other countries, July 2025. https://www150.statcan.gc.ca/n1/daily-quotidien/250811/dq250811a-eng.htm
- Statistics Canada. (2025, July 23). International travel, June 2025. https://www150.statcan.gc.ca/n1/daily-quotidien/250723/dq250723a-eng.htm
- Statistics Canada. (2025, April 10). International arrivals and border crossings. https://www150.statcan.gc.ca/n1/daily-quotidien/250410/dq250410c-eng.htm
- Statistics Canada. (2025, June). Monthly Tourism Indicators. https://www150.statcan.gc.ca/n1/pub/36-28-0001/2025006/article/00006-eng.htm
- The Guardian. (2025, August 12). US–Canada travel tensions rise amid political rhetoric. https://www.theguardian.com/world/2025/aug/12/us-canada-travel-trump
- Travel and Tour World. (2025, August). US road trips nosedive thirty-seven percent, air travel slumps twenty-six percent. https://travelandtourworld.com/news/article/canada-sees-powerful-decline-in-international-travel-july-u-s-road-trips-nosedive-thirty-seven-percent-air-travel-slumps-twenty-six-percent-overall-arrivals-drop-sixteen-percent
- US Travel Association. (2024). Canadian contributions to US tourism (Historical Data).
