Can tourism be a policy tool to moderate trade balance?

Abstract

The trade war between the United States and China started in early 2018 when the US initiated an additional 25% of tariffs on many imported goods from China. The trade dispute persisted to the end of 2019 after a few rounds of escalations. Many commentaries agree that the US-China trade war is a struggle for technological and geo-strategic dominance (Gros, 2019) and has a political motive (Lai, 2019). Numerous articles have analysed the effects of the trade war on GDP, manufacturing and non-manufacturing goods, welfare, employment, export and import for both countries and attempted to explain why the dispute persists (Li, He, & Lin, 2018). The discussions have focused on the trade in goods (Lau, 2019) and few included trade in services (e.g., tourism). International tourism provides economic benefits to the destination country and could correct the balance of trade (Song, Dwyer, Li, & Cao, 2012). Political instability decreases the incoming number of visitors and hamper tourism revenues (Dogru, Isik, & SirakayaTurk, 2019), further intensifying trade deficit. This research note discusses whether international tourism could be used as a policy tool in a trade war. This study is timely and important, given that the geo-strategic competition and economic rivalry is likely to persist.