The Looming Tariff Threat: What it (May) Mean, and If It’s Even Possible
Is a “tariff” on non-Hollywood and non-local productions really the way forward to a healthier domestic film and TV industry? While in the current climate of on-and-off announcements, it’s (probably) unlikely we’ll ever see President Trump’s threatened tariffs on non-local content come to life, at least not as originally portrayed, it’s worth looking a little deeper at what the recently proposed tariffs could mean for the industry after last week’s surprising announcement. Brandon Blake, entertainment attorney Los Angeles at Blake & Wang P.A., has some further insight to share.
Movies Made in America, Again
As with most of the announcements made around “Liberation Day”, the suggestion last week that non-domestic movies would be subject to a rather steep 100% tariff came as a surprise. Then, again, as many of the tariff-based trade negotiation tactics we’ve seen so far, was almost immediately rolled backwards— for now. What will come in the future is less certain.
While it is always positive to see the government take an interest in the industry and its needs, it’s debatable if yet another clumsy and difficult to enact in practice tariff is the way ahead. Especially given that movies and entertainment productions aren’t, strictly speaking, the “products” to which tariffs traditionally apply, usually falling in the “services” category that most of the US’s key exports do. Typically, this is seen as a sign of a mature and healthy economy.
While claims that foreign-made movies are a “National Security threat” may be a step too far, let’s be honest— the new administration is partly right. The decline in local shoot days, both in LA and throughout the country, have not been missed. Nor have the knock-on effects on the job market. Whether you also see that as other nations “stealing” the domestic movie industry, or simply the inevitable result of globalization and more competitiveness from offshore location shooting destinations when not all US destinations have kept up, however, is a different matter.
The real question, however, is whether tariffs at any level (we’re unlikely to see 100% in the final reworking of this idea, if it even rises again) can even be applied to movies, as a non-physical product. Not to mention whether this tariff, if even enactable, would make a meaningful impact on the downturn in the local entertainment industry-little suggests it would become more than another “tax” to weather.
Currently, we have no idea when, or even if, the idea of foreign film tariffs will rear their head again. On the legalities front, however, it’s pretty clear. Tariffs are only applied to goods, not services. Which calls the legal enforceability for a potential tariff into question without some restructuring of how the whole tariff system is applied.
That aside, however, it’s also a lot easier to promise than provide, given the many (many) questions raised, from what (and when) it would apply to, through how to handle it over streaming, if we’re talking just filming location or also financing, who would handle enforcement, and more. Opening up the idea of “tariffs” for services may not be a net positive for the US and its mature markets over all industries, either.
In this lawyer’s opinion, it’s a positive sign of government attention to an important issue for the industry. We’d likely, however, see higher net positive results from instead focusing on efforts to reinvent and re-establish the domestic industry as an appealing one, through lowering the costs of doing business in the US, improving tax incentives, streamlining union regulations, and fostering local growth, rather than trying to tax our way out of a crisis caused by lack of evolution to changing entertainment markets.
Tariffs for films makes for an interesting thought exercise, but an impractical model in reality— and there’s little clarity on how those generated funds would make their way back into the industry that needs them, either. Focusing on re-establishing the global foothold of the domestic entertainment industry seems like a far more productive way to address this issue, even if not quite as “soundbyte-worthy” as a tariff announcement and lofty promises may be.
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