President Donald Trump’s proposal to impose tariffs on movies produced outside the U.S. on Sunday night has generated a mix of confusion and fear among the entertainment industry.
By noon on Monday, White House officials clarified that no final decisions had been made and that the administration was exploring all options.
Trump’s initial proposal, shared on Truth Social, called for tariffs on any movie entering the country that is produced in foreign lands. He cited the harmful impact of incentives offered by other countries as the reason behind this move.
Donald Trump appears at the National Republican Congressional Committee (NRCC) dinner on April 8
Credit: Reuters
Trump emphasized his desire for movies to be made in America again.
Before 2 p.m. on Monday, Trump spoke from the Oval Office and announced that he would meet with industry officials to ensure their satisfaction with his tariffs plan.
Trump clarified that his intention was not to harm the industry but rather to help it.
However, industry officials and observers responded negatively to the initial plan. Analysts at Morgan Stanley expressed their concerns in a note to clients, describing the idea as “ill-defined.” They noted that imposing 100% duties on the cost of a Hollywood production would lead to fewer films, more expensive productions, and lower earnings for everyone in the industry.
The analysts pointed out that for any given film, various aspects such as writing, production, editing, post-production, and visual effects can be performed in different countries.
They also highlighted several gaps in Trump’s proposal, including the lack of information about whether the tariffs would apply to TV productions, the specific aspect of a production that would be subject to tariffs, the method of charging the tariffs, and whether they could be applied retroactively.
The proposed tariffs come as Hollywood grapples with one of the most challenging periods in its history. Social media, changing viewer tastes and habits, the emergence of artificial intelligence, and the aftermath of the writers’ strike have all contributed to the industry’s struggles. These factors have resulted in a decline in box office returns, with last year’s total reaching just $8.75 billion, a 3% drop from 2023 and significantly lower than the $11 billion pre-pandemic average.
It’s true that Hollywood has increasingly chosen to produce its films overseas, particularly in Canada, New Zealand, and the United Kingdom, where spending and investment have seen significant increases. Last year’s biggest live-action hits, such as “Deadpool & Wolverine,” “Wicked,” and “Dune: Part Two,” were filmed in studios outside the United States.
However, unlike most sectors Trump has targeted for tariffs, the U.S. entertainment industry enjoys a substantial trade surplus with the rest of the world due to persistent foreign interest in American titles.
Several Hollywood representatives declined to comment on Trump’s proposal or did not respond to requests for comment.
The Hollywood sign in Los Angeles on September 25, 2023. (Photo: Eric Thayer / Bloomberg via Getty Images file)
Meanwhile, the financial impact was already being felt. In Monday trading, shares of major entertainment companies like Netflix, Paramount, and Warner Bros. Discovery declined.
The proposal comes as Trump has appointed Mel Gibson, Sylvester Stallone, and Jon Voight as “special ambassadors” to revive “lost business.” Notably, all three men have supported Trump and espoused conservative views.
Initially, White House officials referred additional questions about the proposed tariffs to the Commerce Department. In a post on X, Commerce Secretary Howard Lutnick responded with “We’re on it,” above an account that reposted Trump’s Truth Social post.
While some analysts remain optimistic about the potential of content entities to evade the tariffs, others express caution. Analysts from Wedbush, without firsthand knowledge of the White House’s vision, believe that as long as there is a certain degree of production performed within the United States, a tariff could be either avoided or minimized.
They also suggest that studios may relocate some production elements to the U.S. to appease Trump, although this move could potentially impact their profit margins.
Furthermore, Wedbush analysts are optimistic that the entire tariffs episode could eventually subside. They believe that foreign countries’ reactions and the assertion of their constitutional authority by Congress will eventually influence Trump to reconsider his stance.
