Trump’s 100% Tariff on Movies: 8 Key Questions the Industry Is Now Pondering and Dreading

by

Of course, it was too good to be true.

During the initial 100 days of Donald Trump’s second term as President, there was a glimmer of hope that the entertainment industry could avoid the significant expenses and continuous turbulence caused by his ambitious efforts to restructure international trade.

Or,

For the first 100 days of Donald Trump’s second presidency, it seemed that the entertainment industry might be spared from the high costs and endless confusion resulting from his aggressive plans to overhaul global trade.

Trump’s initial “Liberation Day” tariffs excluded entertainment goods such as movies, as they are categorized as services rather than tangible items. The industry found comfort in the knowledge that Hollywood productions, similar to tech giants, maintain substantial trade surpluses for the U.S., given the considerable foreign revenues they generate compared to the minimal earnings of foreign content within the nation. However, in a recent post on Truth Social, the president announced, in bold capital letters, his intention to focus on the film industry next.

Trump posted: “The American Film Industry is experiencing a rapid decline.” He added that foreign countries are providing numerous incentives to lure our filmmakers and studios away from the U.S., causing significant damage to Hollywood and many other domestic areas. This strategic maneuver by other nations poses a threat to our national security. Moreover, it serves as messaging and propaganda!

He went on to say: “Consequently, I am empowering the Department of Commerce and the U.S. Trade Representative to initiate a process whereby we impose a 100% tax on all movies entering our nation that were produced overseas. We aim to encourage movie production within the United States once more!

Commerce Secretary Howard Lutnick replied to Trump’s statements on X by writing, “We’re on it.”

According to several sources contacted by THR, it was Jon Voight and his manager Steven Paul who sparked President Trump’s recent fascination with film production. They have been meeting with heads of Hollywood guilds and studios to discuss a plan for Trump to increase U.S. film production through a domestic incentive program. However, instead of viewing the proposal as an incentive, Trump seems to be interpreting it in his preferred way: using tariffs as a form of punishment rather than as a means to encourage.

Worldwide cinema sphere is experiencing a foreseeable blend of apprehension and complete bewilderment as initial responses surface.

According to Henning Molfenter, who led film and TV production at Germany’s Studio Babelsberg and oversaw major US productions like Captain America: Civil War, The Matrix Resurrections, and Wes Anderson’s upcoming feature, The Phoenician Scheme (set to premiere in Cannes), it was short-sighted to believe that the broader tariff conflict initiated by Trump wouldn’t affect Hollywood. However, it remains unclear what aspects of the industry will be affected. Will it only be movies, or will streaming series also be impacted? Does this extend to visual effects, co-productions, and international film financing? There is a significant level of ambiguity.

Molfenter echoes a common refrain: “How could this even work?”

In light of the possibility that the proposed policy might not materialize, here are eight crucial queries the film industry is likely to deliberate upon, which they may use as counterarguments in response to the president’s direct and forceful initial statement regarding the film sector.

What films will be hit by tariffs, and will it be retroactive?

For decades, film studios have been producing their major movies abroad to capitalize on picturesque international settings and financial benefits like tax rebates and incentives that help reduce costs. For instance, Paramount’s Mission: Impossible – The Final Reckoning, bound for Cannes, utilized tax breaks in the U.K. and other locations to offset its substantial budget. Similarly, Warner Brothers and Legendary Pictures’ A Minecraft Movie, this year’s biggest blockbuster, was primarily filmed in New Zealand, with some scenes captured in Canada. Notably, James Cameron’s Avatar series, produced by Disney, was entirely shot in New Zealand. More recently, Marvel’s Avengers: Doomsday commenced filming in London. This trend of shooting abroad is quite extensive.

Is it possible that Trump’s tariffs would affect films that were produced before the implementation of these tariffs? If this is the case, the financial impact on studios could be significant. Approximately 45% of the $875 million global box office earnings for A Minecraft Movie, which equates to the $400 million it made in the U.S., theoretically might be subject to Trump’s 100 percent tariff.

How does the Trump administration plan to categorize films produced abroad? Is it enough for any part of the movie to be filmed outside the U.S., or are there specific requirements like a certain portion of the budget being funded through international production incentives? At present, these details remain unclear.

What about Netflix?

Trump’s early statements on social media focused on “films,” but experts in the entertainment industry suspect that any taxes or tariffs he may propose would also affect series production. This could significantly impact streaming services like Netflix, Amazon, Disney+, HBO Max, and others, which have thrived by creating content globally for a global audience. If these tariffs were to be implemented, would Netflix need to remove popular shows like “Squid Game,” “Money Heist,” and “The Crown” from their U.S. platform to avoid taxes or face penalties? Furthermore, it’s unclear how such tariffs would be calculated for streaming services that offer a vast selection of foreign-made titles to American customers. How much of Netflix’s U.S. subscription revenue comes from non-U.S.-produced shows? This is a question that needs answering.

Would a tariff bring production back to the United States?

As a movie enthusiast, I can’t help but agree with Trump when he claims that film production in America is struggling. Just recently, FilmLA reported a 22% decrease in shooting within Los Angeles over the three months from January to March this year. It’s been over a year since the strikes that halted the U.S. film and TV industry, yet production hasn’t fully recovered in L.A. Some of the industry has indeed moved across state lines – Marvel, for instance, has filmed many of its blockbusters in Atlanta, leveraging the state’s 30% tax credit. However, it’s undeniable that runaway production, to cities like London, Vancouver, Budapest, and Christchurch, has significantly reduced the number of American-made films being produced.

However, could a movie tax incentive truly revive domestic film production? Primarily, studios and independents opt for international locations due to financial reasons. Filming in the U.S., with no federal tax breaks comparable to those offered in countries like the U.K., Europe, or Australia, can be 30-40% costlier. Moreover, American crews are more expensive, given their higher wages resulting from strong film and TV unions. Therefore, it’s questionable whether a tariff alone would be sufficient to entice production back within our borders.

If there’s no local tax credit to compensate for the reduced incentives overseas, the higher costs of producing movies in the U.S. might result in studios making fewer films or opting for more digitally-focused productions with increased volume stage and green screen shooting, or greater use of artificial intelligence (which could lead to issues with unions due to their stringent rules regarding AI usage).

For small and medium-sized independent filmmakers, a tariff might imply that their movies won’t be produced at all.

How will other countries respond?

Trump’s Tariffs for Freedom Day had few options for counteraction by other countries due to the massive trade deficit in physical goods with the U.S. being so widespread. However, this isn’t the case when it comes to entertainment. The U.S. exports nearly thrice as much entertainment as it imports, as per the MPA. In 2023, the latest year for which data is available, U.S. films accounted for 71.1% of cinema admissions in Europe, while locally produced movies made up only slightly more than a quarter of sales. A reciprocal tariff response from foreign governments could increase the cost of U.S. movies overseas, which could be disastrous for Hollywood, still grappling with a post-COVID slump at the box office.

What happens to the foreign-language distribution business?

Purchasing foreign-language movies in the U.S. has always been a challenging market. With Trump’s tariffs, it might become extremely difficult or even unfeasible. Will niche film distributors in the U.S., such as Neon, Mubi, and Sony Pictures Classics, still be able to acquire and release outstanding films from France, Germany, and Japan in North America when they will cost twice as much due to Trump’s tariff? If so, what would it imply for American culture if we were cut off from a significant portion of the world’s best cinema?

What about post-production? 

Just as various countries provide financial incentives to draw film production to their territories, numerous foreign governments also offer comparable rebates for post-production work carried out within their boundaries. If Trump’s proposed movie tariff extends to post-production work done outside the U.S., what might happen to renowned companies like New Zealand’s Weta FX and Weta Workshop, or Netflix’s Scanline VFX (based in Canada and Europe), as well as the U.K.’s Double Negative and Framestore? Given that post-production has grown into a truly global industry, could Trump potentially halt this trend?

Is it possible for international co-productions to endure in the film industry?

In an effort to keep their productions afloat, independent filmmakers have learned to utilize every resource available, frequently shooting overseas to take advantage of rebates and utilizing foreign grants through co-production agreements. For instance, Brady Corbet’s critically acclaimed indie film The Brutalist, which had a budget of only $9.6 million, might not have been made in its current form without being set up as a Hungarian-U.K.-U.S. co-production, capitalizing on various tax incentives and production subsidies, and filming in low-cost Budapest. Many mid-budget action movies, such as those starring Gerard Butler, Liam Neeson, or Jason Statham, depend on lower cost crews and tax incentives, primarily in Eastern European countries, to make the financials work. The majority of new projects being presented for the Cannes film market next week involve some form of international co-production or shooting outside of the U.S. Is the market for these co-productions dying due to recent changes in policies?

Will this actually happen?

Currently in the Trump era, the president known for his unpredictability appears to be adhering to a worn-out script, much like any other lengthy, lowbrow TV series. Is it probable that Trump’s tariff film will persist in its original, harsh and sweeping version, or will it eventually soften, similar to many of his other art-of-the-deal strategies? At this moment, the markets seem only moderately troubled. Before the market opened, Disney’s stock dipped by almost 1%, while Netflix and Warner Brothers Discovery declined by approximately 3%.

Read More

2025-05-05 13:28