California's Gavin Newsom urges tax credit amid Trump's film tariff proposal

The film world could be in for a rough ride, as President Trump is considering a 100% tariff on movies made abroad that come into the United States. This proposal (meant to boost national security and the economy) has raised plenty of flags in an industry that’s still trying to get back on its feet after the pandemic. With big American studios pulling in loads of revenue from overseas, many fear that any payback from other nations could hit hard.

How the film industry might suffer

News of the proposed tariff has sent shockwaves through a sector that hasn’t fully recovered from lower box-office numbers during the pandemic. President Trump even called the U.S. movie business “dying a very fast death,” although some experts think that’s a bit of an exaggeration. Yes, theater earnings have dropped, but there are still films holding strong on the big screen (showing some real staying power rather than a complete collapse).

Studios are on edge about further upsetting an already shaky financial situation. Since most of their cash comes from international screenings, any new fees might just worsen their money problems. For example, Disney’s “Inside Out 2” raked in $1.7 billion globally, with 61.6% of that coming from overseas markets. Warner Bros. Pictures’ “Barbie” wasn’t far behind, with 56% of its ticket sales coming from outside the U.S.

U.s. film exports still on top

Even with these worries, it’s worth noting that the United States still leads the world in film exports, sending out movies worth triple the amount it brings in. American studios play a major role in pushing global box office numbers (which shows just how influential they are on the international stage).

That said, there’s plenty of uncertainty as top studios and experts wait to hear more details before weighing in. The White House hasn’t yet spelled out which films would fall under these tariffs or whether the charges would hit production budgets or theater receipts.

Some hurdles and unknowns

There’s added confusion when it comes to figuring out what exactly counts as a foreign production. With so many movies involving international talent or shooting locations, enforcing these tariffs could be a real headache. Insiders worry that this murkiness might put a stop to new projects and make working with partners overseas a lot trickier.

Streaming giants like Netflix could also be thrown for a loop if these measures affect how they bring international content to U.S. viewers. A few experts even think studios might hit pause on projects abroad until they get a clearer picture of the rules.

Perks for filming outside

A lot of movies are shot in places like the U.K., Canada, and various European countries because of tempting tax breaks. In a counter-move, California Governor Gavin Newsom has floated the idea of doubling the state’s film and TV tax credit to keep production local. He’s also pushing for a $7.5 billion federal tax credit for the film and TV industry (suggesting that the federal government should team up to bring projects back to Hollywood).

There’s also the ongoing worry about “runaway production”—when cities overseas dish out tax incentives to lure filmmakers away from Hollywood.

Money moves and market reactions

If tariffs on foreign movies are put into play, it could signal another twist in Trump’s trade strategies (after previous moves that targeted items like cars and toys). Today, services make up a bigger slice of the economy—including big names like Google and Netflix—so ramping up these measures might invite similar actions targeting service industries from other countries.

Economist Justin Wolfers warned that adding tariffs on movies could turn things up a notch in trade disputes: “If Trump is serious about tariffs on movies, it’s a very dangerous escalation” (a sentiment that was echoed in the stock market, with shares of Netflix, Disney, and Warner Bros. Discovery taking a hit).

While talks continue both at the White House and with industry insiders, nothing’s set in stone yet. President Trump has said he plans to sit down with movie executives before taking any further steps: “We’re going to meet with the industry; I want to make sure they’re happy about it.”

This unfolding situation highlights the tightrope walk between strategies to boost the economy at home and the global nature of entertainment—a balance that will need to be handled with care to avoid throwing a wrench into an industry that’s still finding its footing.