Donald Trump just announced his plan to impose a 100% tariff on all films ‘made’ outside the USA — again. The idea was floated before in May. What constitutes the ‘making’ is left undefined. This never-seen-before policy would be the first to levy duties on a service. The President claims that, if enacted, the tariffs would protect America’s film industry from foreign nations who are trying to “steal” from it. Sneaking in a Newsom critique, Trump slammed the California Governor for his “weak and incompetent” efforts at safeguarding America’s and, in particular, the state’s film sector. But a quick look at history and economic logic would suggest that Trump’s tactic may do far more harm than good. And that is pretty much in line with the reckless, decorum-less political gamble he’s been playing so far. If you go looking for clarity in his policies, you might as well be scouting for the pristine in murky waters.
Historical examples are abundant in proving how protectionist measures can backfire. The 1930s’ Smoot-Hawley Tariff in the US resulted in retaliatory tariffs being issued by others, a steep drop in international trade, and the deepening of the Great Depression. The intention, then too, was to ‘protect’ domestic producers in farming and industries. For Trump’s own tariffs, the examples in flaw are still plenty: that imposed on steel and aluminium has driven domestic prices up, causing supply chain disruptions, and reaping barely any benefits for domestic production.
Trump makes the grave mistake of overlooking Hollywood’s collaborative nature which has made American cinema globally dominant. Movie franchises like The Lord of the Rings or Avengers, while financed partly by American studios, rely heavily on international locations, crews, and co-productions. Tariffs, as devised by the President, could make similar projects financially unviable. This would, in turn, cut jobs for American workers and inflate production costs.
So, who exactly is Trump seeking to benefit? Certainly not the stakeholders of the American film industry. Based on the repetitiveness-sans-action of Trump’s movie tariff plans, these seem more like a blunt-dagger run against Gavin Newsom’s potential Presidential run, with little to no tangible impact. And to quote Wes Anderson, “Can you hold up the movie in customs? I feel it doesn’t ship that way.”
Blocking foreign films and penalising co-productions also cuts down on diverse storytelling and creative risks. American audiences could potentially face isolation. When markets are restricted in this manner, the creative sector ultimately takes the bad blow.
The tariffs will invite reciprocal action on American movies that, as is, are seeing a dwindling share in global box office stakes. In almost years, its share has dropped from nearly 90% to less than 70%. So the tariffs can significantly affect the annual revenue that the country makes from its film export. The trade surplus in movies that the US currently revels in will start falling. Moviegoers will also start facing higher ticket prices as studios try to match the increased costs of production. Both the industry and the audience end up being losers.
That a self-proclaimed magnate does not see the economic nuance in such announcements makes for a joke in itself. Too bad this is Presidential politics with grander implications, and not a one-off businessman’s antics we’re talking about. It does not take much effort to realise that globally integrated industries are bound to suffer at the hand of tariffs. These end up creating pain points that serve no long-term gains. The creative sector is perhaps the worst at handling such disruptions.
Trump has always been a man of sudden action. But it would do him and his country good if he considered targeted incentives as alternatives to his tariff game. Or better yet, stick to the tax credit system that Hollywood or, for that matter, any industry is familiar with.‘Protectionism’ that wrecks domestic industries will not gain applause.
