With Trump’s Europe travel ban, world economy takes another hit

By temporarily banning most European travellers from the United States, President Donald Trump has struck at the lifeblood of global commerce, further restricting the flow of business people and tourists across borders and putting the world’s economy in greater jeopardy.

The abrupt halt will shake tourism-dependent industries on both sides of the Atlantic Ocean, from airlines to hotels to museums and amusement parks. It will disrupt ambitious business plans. It will add to the problems of world leaders already wrestling with the relentless coronavirus outbreak and the threat it poses to jobs and livelihoods.

It adds to the world’s growing isolation as governments around the world tighten and even close their borders to stop the outbreak. It will also hammer the confidence of the world’s spenders, who are watching the news of the pandemic and increasingly choosing to stay home and keep their wallets closed.

Shares in European airlines were hammered Thursday after Trump late Wednesday announced that he would suspend travel from Europe to the United States for 30 days, with the exception of Britain. The State Department also warned Americans that they should reconsider all international travel, the most severe caution it can offer short of “do not travel.”

Travel and leisure stocks slumped nearly 10% on the benchmark Stoxx 600 index, and European airline shares plunged as much as 20% as the sector braced for a nearly unprecedented brake on activity. Air France, Lufthansa and IAG, the owner of British Airways and Iberia, fell as much as 13%. Shares in Carnival, the cruise ship operator, fell to 11-year lows.

Questions swirled about the possibility of work furloughs or potential layoffs. In Rome, Ciampino Airport, a hub for low-cost airlines, announced Thursday it would shutter entirely as of Friday because of the outbreak. Rome’s Fiumicino Airport, which hosts international flights, is bracing for reduced activity, its operator said.

The move worsened a stock market slump in Asia and sent airlines and other industries scurrying for answers. European visitors to the United States, excluding those from Britain, totalled nearly 11 million in 2018, accounting for more than a quarter of all travellers.

Travel and tourism between the United States and Europe, including areas not covered by the ban, is a business totalling roughly $130 billion annually, according to US data. The blow will be felt in both regions, as airlines that cannot bring European travellers to the United States are unlikely to maintain a large number of flights going the other way.

Airlines had already been cutting routes across the Atlantic as travellers increasingly chose to stay home. Still, the industry will take an immediate hit.

Air France KLM’s revenue from North American business, which includes destinations outside the United States, totalled $4 billion last year, or about 13% of its sales. Lufthansa’s totalled $3.7 billion for the first nine months of last year, or about 15% of its sales.

United Airlines and Delta Air Lines both reaped about $7.4 billion from flights over the Atlantic last year, which includes business beyond the countries affected by Trump’s order. For United, that totalled 17% of revenue. For Delta Air Lines, it represents about 15%.

United wasn’t immediately available for comment. Delta said it was in contact with the government and working to comply with the ban. Delta said in a statement that it would “quickly make adjustments to service, as needed, in response to government travel directives.”

The Association of Flight Attendants called the ban “irresponsible” and accused the Trump administration of announcing the ban for political reasons. “Without any consultation with the industry, we don’t even know what this means,” said Sara Nelson, president of the union.

It is far from clear whether Trump’s order will help stop the outbreak in the United States. The virus is now being spread by Americans who have had no contact with regions that have high rates of infection. Italy was one of the first countries to cut off all travel from China and Hong Kong after the coronavirus first publicly emerged in the Chinese city of Wuhan in January. It is now the centre of Europe’s outbreak.

Still, the order adds to the barriers being erected around the world. India on Wednesday put a halt to all tourist visas. China since January has restricted the ability of its own people to travel, and it has added growing restrictions for visitors as well. Anti-immigrant groups in Europe have called for even tighter borders.

Such barriers undermine the confidence of the world’s consumers. In the United States, in Europe, in China and around the world, consumers have emerged as a major economic force, as more countries grow more prosperous and as widespread internet access encourages them to buy even more.

They have grown even more important since the United States launched a trade war with China, shaking global manufacturing. Consumers helped pick up the slack.

Now that essential engine is sputtering.

Consumer spending “has effectively held up the economy in what has been a manufacturing recession. Anything that jeopardises that will be problematic,” said Shaun Roache, chief economist at S&P Global.

“Probably the biggest effect will be on confidence,” Roache said, referring to Trump’s ban. “The more you see these kinds of measures, the less you’ll have people willing to venture out of the house. That hits consumer spending.”

For the business world, the effects will go beyond consumer demand. The ban on travel will hurt cooperation on research and development for big companies that have laboratories around the world. It will throw a wrench into bankers’ ability to do audits for mergers and acquisitions.

“Just imagine as a businessman, you cannot visit the largest market in the world and the second-largest market in the world. How much worse can it get?” said Jörg Wuttke, president of the European Chamber of Commerce in China.

Teleconferencing and working from home are only short-term fixes, he said: “The world cannot operate online.”

©2020 The New York Times Company