April 5, 2018 / 7:34 PM / 18 days ago

Breakingviews - Chinese visitors can hit nerve tariffs don’t reach

NEW YORK (Reuters Breakingviews) - The fact that South Dakota’s official visitor website is available in Chinese speaks volumes about the links between the United States and the People’s Republic. Levies on Chinese TVs and microscopes, and U.S. soybeans and ginseng, threaten direct economic damage to both economies. But a reduction in the number of Chinese visitors to the United States, which has already begun, could hit a nerve that trade tariffs don’t reach.

Chinese tourists take photographs of themselves outside of the New York Stock Exchange shortly after the opening bell in New York, July 8, 2015. REUTERS/Lucas Jackson

President Donald Trump is intent on having a smaller trade deficit with China. Tourism, though, is one area where he can already claim a surplus. When a visitor buys a souvenir, grabs a burger in Trump Tower or parks a car at Mount Rushmore, that transaction is classed as an export. Chinese visitors spent $33 billion on U.S. travel, goods and services in 2016, according to official data, while Americans reciprocated with little more than $5 billion on their travels to the Middle Kingdom.

America’s $28 billion tourism surplus with China meaningfully reduces the overall trade deficit. The equivalent figure for United Kingdom tourism was less than $3 billion in 2016. The United States’ entire agricultural trade surplus was just $21 billion in 2017. The export value of U.S. soybeans – one of the products China is now punishing with its retaliatory trade tariffs – to every country in the world barely topped $22 billion.

Chinese tourist arrivals are forecast to reach 4.5 million by 2022 by the U.S. National Travel and Tourism Office. Were they to spend just 10 percent per person more than they did in 2016, that would amount to almost $56 billion, all classed as exports. The additional spending would, all else being equal, knock 8 percent off Trump’s pesky trade deficit with China. Upsetting the tourism market further would work against that.

It will take more than trade tariffs to deter many of the Chinese tourists bent on visiting Saks Fifth Avenue or Amish Village in Pennsylvania. But it would be wrong to underestimate the potential for patriotic travel decisions. Chinese tourism to South Korea plunged when relations were frosty, while campaigns to boycott U.S. companies’ products in China are often successful. From Las Vegas to SeaWorld – whose biggest shareholder is Chinese – a dropoff in visitors from the People’s Republic would be felt quickly. When goods don’t cross borders, tourists may not either.

Breakingviews

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