Onset of a Global Trade War for People

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After World War II, we split the planet into East and West—with an Iron Curtain in between. Lesser barriers subdivided each side.

Time passed. Borders loosened. People and goods started flowing more freely.

This was okay at first, but eventually, it became too much. People yelled, “Enough!”

As I’ve written about before, we are now in a great debate over which visitors, immigrants, and goods can cross national borders—and on what terms.

It’s a debate worth having, but we can’t forget that our choices will have economic consequences. Sometimes, a medicine’s side effects are worse than the disease.

Net bookings to the US are down by 6.5%

We’re starting to get hard data on the new travel changes. Here’s part of a recent Guardian report (emphasis is mine).

Flight app Hopper released research earlier this month that showed flight search from international origins to the US has dropped 17% since Trump’s inauguration, compared with the final weeks of the Obama administration…

Hopper found there has been a sharp drop in flight searches to the US since Trump’s travel ban, with a 30% decrease in predominantly Muslim countries, regardless of whether they were included in the ban…

…Hopper found a notable exception in Russia, where flight search demand to the US was up by 88%.

Net bookings to the US are down by 6.5% (excluding China), according to Forward Keys. The analyst says that the Trump travel ban “is putting off people travelling to the US from many regions of the world, beyond the Middle East.”

Maybe those numbers will bounce back, but so far, it doesn’t look good.

Aside from hurting the US travel industry, it deprives Americans of jobs and investment opportunities. But that’s not all.

Europe Is Striking Back

On March 3, the European Parliament voted to end visa-free travel for US citizens visiting the EU. Enforcement could begin within two months.

This isn’t even related to the Trump administration’s new rules. It’s been a long-running dispute about travelers from Bulgaria, Croatia, Cyprus, Poland, and Romania.

Those countries are EU members, but—contrary to agreements—the US government still requires their citizens to obtain visas to enter the United States.

This kind of tit-for-tat could be the beginning of a trade war for people instead of goods.

The global economy depends on businesspeople being able to move around the world relatively freely. Anything that interferes with this free movement, also interferes with economic growth.

Aside from business travel, consider the impact on tourism. We’ve now heard lots of stories about airport immigration officials separating children from parents.

If you are a wealthy family from outside the US, will you bring your kids to Disney World? Probably not… and the Orlando-area economy won’t benefit from your spending.

Trump Is Just Part of a Global Trend

The Trump administration’s border tightening is really just a sign of a larger trend. People and governments all over the world are looking inward—both politically and economically.

I think this is partly a reaction to globalization’s excesses and partly technology-driven. But whatever the cause, it’s happening. And it will have profound implications for the global economy and investors.

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