Travel by Canadians to the United States has undergone a
significant decline in 2025 while other international travel both to and from
Canada is up. According to recent
numbers released by Statistics
Canada, when it comes to air travel, “In October 2025, 1.3 million
passengers were screened for international flights (outside the United States),
up sharply compared with one year earlier (+12.0%). Moreover, international
passenger traffic was significantly higher in October 2025 (+20.4%) than the
pre-pandemic level posted in October 2019. Conversely, transborder passenger
traffic (to the United States) in October 2025 decreased year over year for the
ninth consecutive month, down 8.9% to 1.2 million, and was 5.7% below the
October 2019 level.” Land traffic is also down especially when it comes to
the annual
snow bird migration to warmer parts of the United States and is expected to
continue falling. Moreover, the decline has received substantial international
media attention
given that it represents a remarkable reversal in the perceived travel
relationship between the two countries.
The question that inevitably arises is how much of this drop
in Canadian travel to the United States is the result of a deliberate boycott
and shift in preferences as a result of the words and actions of U.S. President
Donald Trump and how much is due to the usual determinants
of cross
border travel which include variables like the Canada-US exchange rate.
Past surges and declines – the most famous being the late 1980s/early 1990s
cross border shopping phase were strongly affected by changes in the exchange
rate. However, after the travel peak reached
in the early 1990s, one can also argue that there has been a longer-term decline in total
trips by Canadians to the United States.
Figure 1 plots monthly data stretching back all the way to 1972
on the total trips by Canadians returning from the United States (Data Source:
Statistics Canada v1296956586). Also
plotted on the chart is the monthly exchange rate in terms of US dollars per
Canadian dollar with a rise indicating an appreciation of the Canadian currency
relative to the US dollar and a decline a depreciation. In 1972, the Canadian
dollar was near parity with the US dollar and began a depreciation that by the
mid 1980s had brought about a 75 cent US Canadian dollar. There then began a rebound
that saw the dollar peak at just under 90 cents US that was also accompanied by the
massive cross border shopping surge from about 1987 to 1993. Incidentally, this also coincided with the introduction
of the much-despised GST in 1991. In
general, there do seem to be periods of increase in travel during periods of appreciation
and decline during periods of depreciation.
However, the Canadian dollar approached parity again briefly circa 2010 and
while travel by Canadians to the United States increased, it did not approach
the levels of the early 1990s.
A more useful approach to try and sort out the effects of
the exchange rate from those of the presence of the US President would be a
regression approach. The accompanying table presents results from a quick regression
of the log of the monthly level of all return trips from the United States by
Canadians from 1972 to 2025 on a set of variables (with STATA as the estimation
package). First, there are quarterly
dummies with the first quarter omitted.
Traditionally, trips peak in the summer months and are lower in the
winter months particularly for automobile trips, so the months of the winter
quarter are omitted. The 12 months in 1991 that coincide with the onset of the federal
Goods and Services Tax (GST) are included as a variable. The exchange rate defined as US dollars per
Canadian dollar is included (Source: FRED CCUSSP01CAM650N and Bank of Canada). One expects that as it goes up (an appreciation),
the level of trips should also be greater.
I then include several additional qualitative variables that
try to capture shocks that may have affected travel in the 21st century
including a dummy for the September to December period in 2001 that was marked
by the 9/11 terror attacks in New York. The
Covid-19 pandemic variable takes on a value of 1 for the months from April 2020
to November 2021 and of course zero otherwise.
President Trump’s first term from January 2017 to January 2021 gets its
own dummy variable and of course so does his second term starting in January of
2025.
The results? Well, oddly enough, the exchange rate does not appear
to be a statistically significant determinant of Canadians travelling to the
United States when the span of monthly data from 1972 to 2025 is considered. This does seem a bit odd though I should add that
if the regression is only run from the 1972 to 2000 period (on the seasonal
dummies and exchange rate and omitting all the 21st century shocks)
then one gets the expected relationship.
This suggests that Canadians over time may have perhaps gotten used to a
70-cent dollar and their behaviour became more inelastic with respect to its fluctuations
when travelling to the US.
More interesting are the other variables. The onset of the GST was associated with a 64
percent surge in monthly trips all other things given. The months associated with the 9/11 Terror
attack saw a 36 percent drop. The
COVID-19 pandemic was associated with a collapse in trips in the order of 230
percent, all other things given. The
first Trump term which did not come with as belligerent a tone towards Canada
as the second term was not statistically significant in affecting Canada-US
travel. On the other hand, President
Trump’s second term to date after controlling for the exchange rate and
seasonality is associated with a statistically significant 34 percent drop in
total monthly trips by Canadians to the United States.
Of course, this is a very simple specification, and one
might want to add things like income and gasoline prices and perhaps even a
time trend but as it stands, it explains about 70 percent of the variation in
the monthly level of total Canadian trips returning from the United States.
