The Perfect Financial Storm is Here

Travel Bans and the Tourism Collapse

The perfect financial storm is no longer on the horizon; it is here, as we handle a collapse across core economic sectors. Amid the escalating financial losses in tourism triggered by new travel bans and the departure of foreign exchange students, the US economy faces threats from all directions, including record-high debt, the back-and-forth policy shifts around tariffs, and an AI economy displacing labor. This combination of factors is being felt nationwide, resulting in a surge in foreclosures and bankruptcy filings.

Listen: The Professor’s Audio Briefing.

By Alexander Hernandez, J.D., Professor, and Author of Consumer Bankruptcy Law (Routledge).

Analysis & Commentary

New Travel Restrictions

The tourism and hospitality sectors are facing a financial threat driven by immigration policy.

Homeland Security Secretary Kristi Noem confirmed that the full travel ban will be expanded to include over 30 countries. While framed as national security measures, these restrictions cut off significant tourism and business travel.

The Impact of Travel Boycotts

The financial impact is already visible. Cities like Las Vegas, New York, and Florida, which rely heavily on international visitors, have seen major revenue drops. For example, reports indicate that Las Vegas alone has lost nearly a billion dollars in spending from Canadian tourists due to what experts are calling an “unspoken boycott,” where millions of Canadians are simply choosing other destinations.

The Financial Storm Causes a Chain Reaction

Reduced international travel means empty hotel rooms, fewer booked restaurants, and lower casino revenues. The results are fewer shifts, smaller paychecks, and job losses in these key service economies. Nevada is second in foreclosures, and my home state of Florida is first.

The Debt and Housing Crisis: Foreclosures Surge

The combination of inflation and high interest rates has pushed the cost of living and carrying debt to a breaking point for millions.

Record Household Debt

U.S. households are currently struggling under record-high total debt, reaching an all-time high of over $18.59 trillion in the third quarter of 2025, per the Federal Reserve Bank of New York.  Millions of households now face delinquency rates nearing pre-pandemic highs.

The Foreclosure Front

This financial storm is now manifesting in the housing market. Florida currently leads the country in total foreclosure filings. Nevada, I already mentioned, but the same applies to New York, which has also seen a substantial decrease in Canadian tourists.

Bankruptcy filings continue to rise consistently each month for large corporations, mom-and-pop businesses, and consumers. It should also be noted that even though there has been a significant rise in bankruptcy cases, there is still a lag between defaulting on credit cards and filing for bankruptcy, as it could take several months before a debtor files the bankruptcy petition.

The Automation Threat: AI and Job Displacement

The labor market is facing a structural shift as AI moves from a theoretical threat to a real-world factor in hiring and job security.

Job Losses Nearing the COVID Era

While the overall impact of AI on employment is still being studied, initial data suggests significant job displacement. Reports indicate that the rate of job losses directly attributed to AI-driven automation is climbing toward levels of disruption not seen since the height of the COVID-19 pandemic.

Vulnerable Workers: Entry-level workers, particularly those in customer service, clerical, and some tech-adjacent roles, are seeing declines in hiring as companies automate tasks. This creates a deeply concerning situation: high debt meets fewer job prospects, especially for the younger workforce and recent college graduates.

The Policy Response: Tariffs and Inflation

The final financial indicator involves policy shifts attempting to mitigate the financial pain of inflation.

Tariff Rollbacks

In an effort to provide consumer relief and combat rising costs, the current administration has modified or rolled back certain tariffs. Recent executive orders, for instance, have eased tariffs on key food imports like coffee, bananas, and beef, citing the need to reduce prices for American families and businesses. Which begs the question: if removing tariffs reduces costs, what does adding tariffs do?

While the intention is to lower grocery prices and ease inflation, the immediate market impact is often slow, especially if consumers have been getting further in debt these last months, which is clearly the case considering the overall household debt total and bankruptcy filings. Getting into debt is easy; crawling out of it isn’t.

Furthermore, the tariff yoyo, regardless of the goal, creates further uncertainty for businesses dependent on stable global supply chains.

The Professor’s Conclusion

For small business owners and individuals, these factors should have you planning your next move.

The immediate priorities for navigating this perfect financial storm are:

1. Asset Assessment: Reviewing all debt obligations and, if bankruptcy is being considered, determining what is protected under state and federal bankruptcy exemption laws.
2. Liquidity Focus: Prioritizing cash flow and reducing high-interest debt is key as we face financial uncertainty. This could result in considering the Federal Reserve’s Chairman Jerome Powell’s statement on the job market as “low hire, low fire,” meaning companies are avoiding laying off employees as best as they can, and not moving forward with new hires.
3. Future-Proofing: Evaluate your business and factor in the effect of AI on your business and customers.

The current economic environment demands more than just cautious spending, which is an issue I have referenced many times, stating that in an unsure economy, consumers hold on to their money, and the less money circulating the economy, the more it contracts. I’ve compared the economy to my bird pond. The lack of confidence in the economy, in part, resulted in my wife and me deciding this was not the time to relocate.

For one, that would mean getting into additional debt or using more of the net proceeds from the sale of our home to pay off that debt. But it also prevented other simpler issues, such as my decision against installing an RV port, which costs thousands of dollars.

For this reason, my travel trailer sits at the dealership as it is getting worked on because I decided against buying a new one, and trust me, the offers to buy a new one were hard to turn down, but now is not the time to increase my debt.

Now is the time to be strategic and proactive to weather the financial storm. My argument has been consistent: even if the economy does not collapse, then what is the worst thing that could happen to you? You saved up some money and/or reduced debt. It’s a win-win situation.

Colleges and universities can purchase my bankruptcy law textbook directly from Routledge Publishing. Paralegals and students who are buying single copies can do so via Amazon Books. To access my YouTube channel, click this link. You can also listen to my podcast on Spotify.

You can learn more about filing for bankruptcy and the bankruptcy petition via this link. Information on the bankruptcy court system, contact information for trustees, and your state’s exemptions can be found here. The federal bankruptcy exemptions are listed here. The latest version of the 341 Meeting of the Creditors can be found here.

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