Former President Donald Trump recently threatened to impose a staggering 100 percent tariff on foreign films, citing them as a “National Security threat.” These are just some of the challenges the US film industry is currently weathering. Developing these problems are the long-term effects of the COVID-19 pandemic, as well as a decline in international box office receipts. In fact, Hollywood studios grossed nearly $30 billion globally last year. They’ve taken a dramatic leap backwards of approximately 7 percent from 2023.
The industry has shown it is already weathering a stormy sea. Trump’s comments have led to heated discussions about the likely effects of such tariffs. As you may have heard, earlier this year the Writers Guild of America (WGA) went on strike to demand better working conditions. Simultaneously, the Screen Actors Guild-American Federation of Television and Radio Artists (SAG-AFTRA) went on strike, calling for stronger protections against the encroaching threat of artificial intelligence.
Alarmed sounds from film industry insiders insist that the proposed new tariffs will add salt to the wounds. California governor Gavin Newsom has proposed a $7.5 billion federal film tax credit to reenergize the entertainment industry.
Global Challenges Facing the Film Industry
In the wake of the pandemic, the US film industry has experienced devastating crises. The COVID-19 pandemic threw a huge wrench into the mix, shuttering theaters and stopping productions in their tracks. As the industry is still trying to recuperate, it’s easy to see how the effects of Trump’s potentially proposed tariffs hit home hard.
“The Movie Industry in America is DYING a very fast death,” – Donald Trump
Though troubled, Hollywood is still a critical global success. The reality is that many of your favorite American films are at least partly produced—to varying degrees overseas taking advantage of those international markets and financial incentives. As most recently seen in Canada, Australia, and New Zealand—who subsidize these projects with up-front, generous rebates—the production landscape can drastically shift.
Australia provides a 30 percent rebate on production through its location offset scheme. This has largely made the country an attractive place for filmmakers to flock. Likewise, New Zealand has enacted similar tax breaks, reaping the rewards as foreign productions flourish on their coasts.
Sky Studios Elstree in the UK has hosted major Hollywood productions. Fans are particularly looking forward to the upcoming release of “Wicked” in 2024! Greta Gerwig’s record-breaking blockbuster “Barbie” shot a significant portion of its production at Warner Brothers’ studios in Leavesden, Hertfordshire. This production injected more than 80 million pounds ($106 million) into the UK economy while giving a big boost to local businesses.
Implications of Tariffs on International Relations
If only for his dangerously misguided hawkishness against foreign films, we should all be asking what that means for America’s standing in the world. These newly proposed tariffs would be particularly painful for Hollywood. They may jeopardize ties with countries that have become key collaborators in the production of films. The Australian government has been quite explicit from the very outset that it intends to protect its own screen industry.
“Nobody should be under any doubt that we will be standing up unequivocally for the rights of the Australian screen industry.” – Tony Burke
Experts have cautioned that imposing tariffs would be counterproductive, prompting retaliatory tariffs from other countries. The success of Indian films in international markets is a phenomenon. In their home market of the US, they have collectively grossed over $100 million at the box office. South Korean films in particular have gone big, with the Academy Award-winning film Parasite making $53.8 million at the US box office.
Chinese blockbusters such as “Ne Zha 2” have been making out of this world fortunes at home, bringing in $1.9 billion from almost 80,000 screens. With over 5.4 million people of Indian descent currently residing in the US, it now has the largest Indian diaspora population worldwide. If tariffs hinder regional partnerships, India’s burgeoning film industry could be hard pressed.
Industry Responses and Future Prospects
The promise of new tariffs has elicited different reactions from industry leaders and analysts. Critics argue that these measures could deal a “knock-out blow” to an industry still recovering from COVID-19 and ongoing labor disputes.
“These tariffs, coming after COVID and the recent slowdown, could deal a knock-out blow to an industry that is only just recovering,” – Philippa Childs
Analysts have commented that there remains a substantial degree of uncertainty as to the administration’s intentions with respect to foreign film tariffs. As to what action the government might take, some experts argue it would come with more questions than answers.
“There is too much uncertainty, and this latest move raises more questions than answers,” – Paolo Pescatore
Moreover, filmmakers are worried about the long-term fate of Los Angeles as a center of filmmaking. Already, there are fears that the city’s reputation with the industry would be damaged if the proposed tariffs were approved. If these tariffs are imposed without due diligence, the backlash may be impossible to mitigate.
“If we don’t stop the bleeding, then Los Angeles is at risk of becoming Detroit,” – Sarah Adina Smith
Tax incentive supporters counter that helping local productions is the fast track to keeping the industry alive and thriving. For now, it’s critical to continue advocating for the sector and await more information on what policy changes could look like.
“We’ll have to see the detail of what actually ultimately emerges. But we’ll be obviously a great advocate, great champion of that sector and that industry.” – Christopher Luxon
As discussions surrounding tariffs continue to unfold, many industry stakeholders remain hopeful for measures that prioritize domestic growth while maintaining fruitful international partnerships.
