Like many industries, tourism has been upended by United States President Donald Trump’s trade war, with fewer American travellers venturing north of the border and fewer Canadians heading south. But the decline in the country’s largest cohort of visitors hasn’t been as disastrous for Canada as you might expect. Statistics show a significant rise in domestic travel as more Canadians choose to explore their own backyard, as well as an increase in visitors from outside North America. Here, the Financial Post takes a closer look at the numbers and why economists are feeling positive about Canadian tourism this year.

How much does tourism contribute to GDP?

Tourism

contributes approximately $10 billion to Canada’s gross domestic product (GD), according to estimates by Statistics Canada, and is the one sector that has an economic impact across all regions of the country.

In 2024, tourism accounted for 1.77 per cent of the country’s GDP and 3.4 per cent of total employment, with 704,000 people working in the sector, according to the Business Development Bank of Canada (BDC).

The Crown corporation said the sector is made up of industries such as accommodation (27 per cent),

transportation (24 per cent),

food and beverage services (15 per cent) and other tourism-related goods and services (34 per cent).

A report by TD Economics estimates approximately $100 billion was spent on tourist-related activities in 2024, encompassing both personal and business travel by residents and non-residents.

How has the trade war changed travel patterns?

A report released by Statistics Canada on June 25 highlighted recent changes in

cross-border travel

, particularly the decline in Canadian-resident trips to the U.S. since the advent of the

trade war

.

The U.S. has long been the primary international travel destination for Canadians, due in part to its proximity and warmer climate. Statistics Canada said all Canadian-resident trips to the U.S. totalled 39 million in 2024, representing 75 per cent of all Canadian-resident travel abroad.

But this year, data from the agency show that Canadians’ interest in travelling to the U.S. has been waning. Canadian-resident return trips from the U.S. have fallen sharply for five consecutive months, and the drop has been widespread across the country, with all provinces bordering the southern neighbour reporting declines for the first time since the pandemic.

Meanwhile, traffic was up for both domestic and non-U.S. international flights at Canada’s largest airports in April, according to Statistics Canada’s latest monthly data on

air passenger travel

.

Domestic traffic was up by 7.4 per cent to two million

 

in April compared to the previous year. This modestly surpassed the 2019 pre-pandemic level by 1.5 per cent, Statistics Canada said.

In April, the number of passengers screened for international flights other than to the U.S. was 1.4 million — up 7.1 per cent

 

over the same month in 2024, and sharply higher — up 19 per cent — than the pre-pandemic level posted in April 2019.

Americans are also visiting their northern neighbours less as trade tensions between the countries persist, with

trips to Canada by U.S. residents

declining for the third month in a row in April.

How could Canada benefit from the changes?

In a survey released in March, Abacus Data said the recent surge in patriotism and reshaped travel intentions represents a pivotal moment for Canada’s domestic travel market.

Domestic searches

on popular vacation sites have significantly increased in 2025, with internal data revealing Canadians’ appetite for homegrown holidays.

Economic uncertainty and the weaker

Canadian dollar

have proved a silver lining for the tourism sector, the BDC said in a March report. While foreign visitors are important contributors to tourism in Canada, Canadians actually make up the biggest share of demand for tourism businesses at about 76 per cent, it said.

Abacus Data said its survey shows that 19 per cent of Canadians who have either changed or cancelled their visit to the U.S. have shifted to travelling to different locations within Canada instead.

The decline in flight bookings to the U.S. has driven some airlines to modify capacity for certain routes.

Flair Airlines Ltd.

, for example, restarted some inter-Canadian routes earlier than planned this year due to the rise in local demand.

Flight data released by OAG Aviation Worldwide Ltd. showed a “collapse” in passenger bookings on flight routes between Canada and the U.S., dropping by more than 70 per cent in every month through to the end of September 2025.

Domestic travellers aren’t the only ones favouring Canada. French hotel group Accor SA, which owns 57 brands including Fairmont and Novotel, said Canada is gaining traction as a tourist destination as travellers increasingly avoid the U.S. for holidays.

Will shifting travel patterns positively affect GDP?

Desjardins principal economist Sonny Scarfone said in a

June report

that increased domestic tourism could act as a stabilizing force by offsetting weaker performance in industries that are more exposed to U.S. trade. Canada has traditionally recorded a travel services trade deficit, but this trend recently reversed, he said.

“When Canadians redirect their vacation budgets to the local economy, the positive ripple effect extends well beyond the tourism sector itself,” he wrote.

Scarfone said that given the current geopolitical climate and relatively weak loonie, Canada has the opportunity to further improve its travel trade balance in the coming quarters by encouraging domestic tourism and attracting more international visitors.

Focusing on Quebec, he said that if half of the province’s residents who plan on cancelling their trips to the U.S. were to redirect their spending domestically, the resulting boost — factoring in indirect economic effects — could add an estimated $900 million to Canada’s GDP.

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TD Economics

expects tourism spending in Canada to grow in the range of two to four per cent in 2025.

While American spending is set to drag

 

on the overall tally this year, with cross-border spending projected to decline by five to 10 per cent, domestic spending at home will offset much of that, TD economist Anusha Arif said in a June 26 note.

Arif said that while hard data is still sparse, early indicators of travel within Canada are encouraging. According to a survey by TD Bank Group, 64 per cent of Canadians plan to travel domestically.

She said growth in spending by domestic and non-U.S. international visitors is likely to deliver an overall net increase of $2 to $4 billion in overall tourism spending for 2025. Propelled by these tailwinds, Canada’s tourism sector could hold up far better than what otherwise would be the case in 2025, Arif added.<

• Email: dpaglinawan@postmedia.com