On Monday, several leading entertainment firms in Hollywood experienced a drop in their stock prices after President Trump announced a surprising 100% tariff on films made outside the United States.
In a post on True Society, Trump indicated that he had authorized the implementation of these tariffs through the Commerce Department and U.S. trade representatives, describing them as matters of national security. However, he didn’t provide much detail on how this would be executed.
“The American film industry is dying very quickly,” he wrote on Sunday, adding that it has become more about “message and propaganda” than anything else.
In response to Trump’s directive, Commerce Secretary Howard Luttonick stated on social media, “We’re working on that,” but he also offered no further elaboration.
The White House clarified on Monday that no final decision regarding these foreign film tariffs has been made yet, but they are evaluating options as part of Trump’s directive to safeguard national and economic security while revitalizing Hollywood.
Stocks for companies like Netflix, Disney, Warner Bros. Discovery, and Paramount dropped over 2% at the start of the trading session but managed to recover somewhat by the afternoon.
Entertainment executives expressed shock over Trump’s latest tariff announcement. “No one saw this coming,” said a studio executive, noting the lack of prior warning or draft language before the social media post that sparked confusion.
The proposed tariffs would mainly affect films produced internationally by U.S. studios, influenced by incentives and production capabilities found in countries such as the UK and Canada.
Trump criticized these international policies, arguing they pose a threat to coordinated efforts among nations and, therefore, to national security.
However, experts caution that implementing such tariffs on films could create significant logistical and legal challenges. Unlike physical goods, films are not easily transported in a manner suitable for traditional customs enforcement.
Determining how to classify and assess a film for customs purposes is likely to require a novel approach, which could become contentious.
“This is not like a steel tax,” one international trade lawyer, familiar with entertainment law, explained. “We’re dealing with intangible products and shared intellectual property, which complicates things.”
On Monday, Netflix’s stock fell by 2.38%, while Disney and Warner Bros. Discovery also faced declines before slightly bouncing back.
California Governor Gavin Newsom’s spokesperson remarked that he supported tax incentives that would keep Hollywood productions in the state. They also noted that Trump does not have the authority to impose customs duties on films.
This announcement comes at a challenging time for Hollywood, which is still trying to bounce back from the pandemic. Studios are relying increasingly on locations abroad to manage production costs, with data indicating a 26% dip in U.S. film and television production over the last two years for projects over $40 million, while budgets in Canada and the UK have reportedly grown.
London has become a favored spot for major American productions, thanks to generous tax incentives and excellent facilities. Upcoming Marvel films and other major franchises like “Mission: Impossible” have recently filmed there.
If other countries respond with their own tariffs against American films, the financial impact could be severe for U.S. studios, particularly given that international markets are crucial for box office revenues.
The U.S. film industry enjoyed a trade surplus of $15.3 billion in 2023, marking a positive balance in all significant international markets, according to the Film Association.
“This could backfire spectacularly,” warned a veteran producer, apprehensive about the potential for mutually detrimental tariffs leading to a collapse in international film distribution economics.
Despite the pushback he’s received, Trump seems resolute in his approach. Earlier this year, he appointed actors John Voight, Mel Gibson, and Sylvester Stallone as “special ambassadors” for Hollywood in an effort to reverse the trend of overseas productions.
“These three immensely talented individuals will act as my eyes and ears. I will adhere to their recommendations,” Trump stated back then.
