On 4 May Donald Trump took to Truth Social to announce, in typically incoherent language, that he was planning to introduce a 100 per cent tariff on all films made outside the United States. He didn’t make clear whether that meant all foreign-made films, or just films that could be considered American but were wholly or partly made elsewhere. Trump is not known to be an original thinker, so where did this idea come from?
Trump lost California in 2024 — not the sparsely populated rural areas but large cities like San Francisco and Los Angeles, the state’s centres of film production. He is attracted by his ego to Hollywood; he wants to be liked there. In January he named three Republican actors, Mel Gibson, Sylvester Stallone and Jon Voight, as his ambassadors to Hollywood. Most people thought: so what?
It seems only Voight took this role seriously. He did some research and soundings in Hollywood and heard the long-term complaint of US labour unions that too much production was leaving California and the United States. He came up with a five-page plan to save Hollywood and attract “runaway production” back to the United States. This included a proposal for a 10 to 20 per cent federal tax credit on top of the many existing state tax credit/incentive schemes, as well as a new tariff on offshore US-originated productions amounting to 120 per cent of the value of any foreign tax credit.
Voight met with Trump in Mar-A-Lago a day or so before the Truth Social announcement. Trump appears only to have absorbed from that meeting what he has described as his favourite word, “tariffs.”
American labour unions have been expressing concern about “runaway production” since at least the 1940s, when Hollywood producers started to embrace the incentives, cheaper labour costs and exchange rate advantages they found in Europe. Later, the same kind of incentives attracted them to jurisdictions including Canada and Australia.
From the 1990s three factors worked to send more and more US production offshore. The first was the growing number of original series aired by cable networks. Countries like Canada became more and more competitive with US domestic producers — particularly from the late 1990s when the Canadian and several provincial governments introduced financial incentives to attract production.
But production only increased dramatically when Netflix created the first international streaming service based on original content. The success of Netflix led Apple, Amazon and other studios to start their own streaming services, also commissioning original content. In 2024 Netflix alone spent US$16.2 billion on films and TV series.
The second factor has been the rising cost of production in the United States, both for feature films and television production. A large budget feature can easily cost US$200 million or more.
The third has been the adoption of digital technology, which has revolutionised the production process both in terms of image capture and the development of highly sophisticated animation and visual effects. It has also had the effect of decentralising postproduction and video-effects work. Vendors can be almost anywhere in the world, distant from the ultimate creative decision-makers but still working collaboratively and efficiently. For Australia this has led to the growth of a strong visual-effects sector focused primarily on the export of services.
In an October 2024 paper for the Motion Picture Association (the industry association for the Hollywood studios), the British consultancy Olsberg SPI reported that 120 production incentives were on offer globally. Typically, they come either as a cash payment or a tax credit calculated as a percentage of production spending in the jurisdiction offering the incentive.
In Australia, for example, the federal government offers a location incentive on physical production and a postproduction and digital VFX offset, both of which amount to 30 per cent of whatever is spent in Australia. The states offer a further 10 per cent. Conditions attached to these incentives are designed to encourage local training and development.
Together, these incentives attracted to Australia $1.2 billion in international production in 2022–23 and $768 million in 2023–24, the downturn having been caused by the now-resolved writers’ and actors’ strikes in the United States. Similar incentives are offered in the main destinations for American production, Canada and Britain.
But incentives alone don’t attract production. The jurisdiction must also have studios and other production facilities and an adequate pool of skilled personnel.
Hollywood labour unions have long complained about the effect of runaway production on jobs in the United States. At congressional hearings in the early 1960s prompted by pressure from the unions, representatives of labour claimed that foreign governments were restraining free trade. The Motion Picture Association’s counter-argument was that runaway production had become essential to the viability of the movie industry.
In 2000, responding to demands from labour unions for sanctions against countries attracting runaway production, vice-president Al Gore commissioned the International Trade Administration to examine the subject. It concluded that incentives played a part in the shift in production but that other factors — globalisation, rising wages in the United States, technological change — were turning what had once been a uniquely American industry into an increasingly dispersed global industry. It also pointed out the complexities and uncertainties of taking international trade-enforcement action to solve the problem, not least being the lack of support for such action from the producers.
Voight is thus the latest opponent of the globalisation of US production who wants the industry return to what he believes is its natural home. The question is whether he has in Trump a president who is not only willing but capable of taking such action.
Trump has upended more than seventy years of US advocacy and progress on trade liberalisation with his penchant for tariffs, albeit flip-flopping on when and how large they are to be. To date these taxes have applied only to goods, but a film or television program is a complex mix of services in which it will be much harder to determine where a tariff might apply. A single shot may now contain elements from several jurisdictions.
In any case, Voight’s proposal is that tariff be used to negate the cost advantage of a production having received a foreign incentive, not to impose (as Trump is proposing) a penalty that doubles the cost of offshore production.
Trump’s plan faces another problem, too. After more than twenty-five years of agreement by the World Trade Organization and in almost every bilateral and multilateral agreement there continues to be a moratorium on any form of duty on e-commerce. If streaming services are not e-commerce, then what are they? Trying to solve the problem of runaway production with tariffs could therefore have a plethora of unintended consequences.
On far more certain ground is the idea of a federal tax incentive on top of the thirty-eight state-based incentives in the United States. California governor Gavin Newsom has proposed discussions with Trump on how that might be achieved. (California has had its own incentive for many years and Newsom is under pressure to increase it.)
Federal intervention faces two other problems. An increased incentive is one thing, but the US industry would need to have the production facilities and the personnel to accommodate production returning from overseas, and that means significantly more investment in infrastructure and training. It is unrealistic to imagine that the current levels of US-originated production could all be accommodated back home.
The other problem is that the jurisdictions that have invested in attracting runaway production are not going to let it go back to America without some form of retaliatory action — higher incentives, for example — thus increasing the possibility of a trade war.
The likelihood is that Trump’s statement will turn out to be nothing more than a thought bubble. But until his administration clarifies what action, if any, it intends to take, uncertainty will inhibit spending and risk a production downturn both internationally and in the US, the reverse of what Voight and Trump wished to achieve. •
