Trump Threatens Film Industry Tariffs – What Next?

On Sunday, President Trump announced a 100% tariff on movies produced outside the USA via a Truth Social post.  This is a big step in the ongoing tariff disruption as it represents a significant shift from focussing on tariffs on goods, to the even more complicated area of taxing imports of services and intangible assets.

President Trump’s concern seems to be based on a decline in film production spend within the USA and references the incentives offered to producers in other countries. Many countries – including Australia and the UK – have used a successful policy mix of tax incentives and public funding programmes (grants and equity investment) to attract US producers away from the US. The high costs of filming in the US – for various reasons such as relative currency strength and heavily unionised workforces – has made filming elsewhere an attractive alternative. This has grown the talent pools outside the US – particularly behind the camera – which has benefited the local film and television ecosystems as well as providing inward investment.

As the week has unfolded, Governor Gavin Newsom of California proposed the Trump administration instead invest in a federal film tax credit to the value of US$7.5 billion to re-shore production in the US – a clear attempt to compete with the tax regimes offered by other countries.  This reflects widespread concern from the Hollywood industry that a tariff may do more harm than good to the domestic industry.

It also emerged that President Trump’s “Special Ambassador to Hollywood”, Jon Voight had provided the President with lengthy and specific proposals on Saturday.  We do not yet know whether the Trump administration will reflect Mr Voight’s suggestions – but the proposals include a Federal American Production Incentive of 10-20% based on a minimum of 75% of physical and post production occurring in the US and an American Cultural test (similar to the UK test used for qualifying as a “British film” for the purposes of the UK Independent Film Tax Credit).  The incentive proposed would apply to theatrical, TV and streaming content. International competition is clearly top of mind, as the Voight document references Australian and UK tax regimes in several places– including proposing a co-production treaty with the UK as a model for subsequent unilateral treaties.

Obviously, there will need to be more detail before implementation, but in light of the high level tariff announcement from President Trump, the following key issues and questions are likely to emerge:

• Timing – Film production has long lead times, onshoring of production cannot happen overnight and any benefit to the US production industry is unlikely to be felt before 2027/2028. Will the tariffs apply to films already completed and ready for distribution or is it prospective only?
• Distribution Revenues – Film production and film distribution are two different business streams in the film industry. While production may have been offshored, the ownership of rights for distribution (and therefore the flow of licensing revenue) is very much US based.  The USA is one of the few net exporters of TV, film and music rights.  In the early 2000s, the US successfully lobbied for an extension to the duration of copyright protection in other countries including Australia and the UK – resulting in a net benefit to the US economy as licensing revenues will flow back to the US for longer.  If a trade war escalates in this space, other countries may revisit the fundamentals of copyright protection as a lever in trade negotiations.
• Definitional Uncertainty – As details emerge, I expect a lot of uncertainty followed by the potential for complex and confusing detail.
  • What is a foreign made film? Is it a film written overseas? Filmed overseas? Has post production and CGI work completed overseas? Or merely something with sub-titles and no canned laughter? This isn’t a straight forward question:
    • Australia for example has a detailed definition of what amounts to Significant Australian Content for the purposes of the producer tax offset.
    • In the EU, the Audiovisual Media Services Directive has a complex definition of a “European work” for minimum content thresholds.
    • The UK has the definition of a “British Film” as mentioned above.
    • In contrast for tariff purposes, the Voight document refers to US based productions that “could have been produced in the US” and receive a production tax incentive in that other location. This suggests there is no expectation that “Emily in Paris” will need to move production to Paris, Texas.
  • More broadly, what is a film? Do direct-to-TV or streaming-only films count and will it be expanded to television as well? The Voight document appears to extend to both television and streaming only content of any format length.
• Enforcement and Valuation – In 2025, hard copies of films rarely cross a physical border where they can be checked, taxed and impounded pending payment. How will this proposed regime be administered?  Further, if US studios are producing films overseas themselves, what internal “price” would be taxed?  Is it the cost of production or the value of the IP created? We’ve already seen some of these transfer pricing debates around film revenue from streaming (in particular, Scarlett Johannson’s challenge to the Black Widow revenue numbers). If the film is filmed both within and outside the US, what value is ascribed to the “import”?  This could easily become as complicated as the modern automotive supply chain.  The Voight document refers to a tariff of 120% (as opposed to Trump’s reference to 100%) of the value of the foreign incentive received.  Corporate Tax Partner Mark Tan discusses the international tax implications here: From Box Office to Tax Office: Trump’s Film Tariffs and their International Tax Implications
• Culture – What is the cultural impact of this decision? Obviously plenty of films are not “offshored” but are genuine local content of the foreign country that happen to get an international release. It remains to be seen whether a motivation for this change is political rather than economic – to allow the US administration to tax non-US ideas and content to reduce foreign cultural and political influence. The Voight document refers to content that “could have been produced in the US” – suggesting foreign films are not the target. Any final regime will most likely be subject to a freedom of speech challenges.
• US Streamer Dominance and Local Content – Any such tariff will interact with a wider concern from US trade partners about the US content giants. Are streamer revenues being sufficiently taxed locally? Do there need to be greater local content requirements?  In late 2024, the Australian government quietly shelved Australian production quotas for US streamers such as Netflix and Amazon Prime Video.  We could see measures like this come back into play as a trade war escalates.
• Free Trade Agreements – This will feed into wider trade discussions for affected countries. For Australia, any policy and tax changes will have to be analysed in the context of the Australia-United States Free Trade Agreement signed in 2004. For the UK, it may impact the UK’s current negotiations for a free trade deal with the US.

On Thursday 8 May, the UK and US announced a deal to exempt the UK from some US tariffs – primarily some automotive, steel and aluminium goods.  This does not however remove the across-the-board 10% tariff.  The announcement made no mention of an exemption from the film tariffs for the UK – so this may be covered as more detail emerges.  It certainly suggests that the US is open to preferential treatment for the UK.

So what will the effect of all this be? Like many of the recent US tariff announcements, the main short term impact is uncertainty which is likely to lead Studios, and commissioning streamers and broadcasters to pause any major investment decisions until there is both clarity and certainty.  In the short term, expect to see more cautious investment on projects targeted at a US audience and a general inclination to delay decision making.

For more, read the following related articles:

Partners, Not Competitors: How Northern Ireland Can Help Hollywood Navigate Its Next Chapter Without The Need For Punitive Tariffs

From Box Office to Tax Office: Trump’s Film Tariffs and their International Tax Implications