Another Trump first: Movie tariffs

Breaking fresh ground with his all-purpose tool, on May 4, 2025, President Donald Trump said he would impose 100 percent tariffs on movies made abroad, complaining that other countries steal Hollywood’s lunch with film subsidies.

Trump provided no details on how the measures would be implemented but said in a social media post that he had assigned Commerce Secretary Howard Lutnick and US Trade Representative Jamieson Greer the task of beginning the process. The administrative details will be formidable and implications for commerce are foreboding. Tariffs on movies will invite other countries to retaliate not only against Hollywood but also against all types of US services exports, including those provided by high tech companies such as Google and Amazon. Trump should cancel his movie tariffs or pause them indefinitely.

Many services are delivered digitally to households and firms: movies and TV series to be sure, but also music, education, accounting, medical and legal advice, retail purchases, and more. It’s most unlikely that Lutnick and Greer will propose a tariff meter on home computers and TVs. Instead, following the European approach towards Big Tech, he will likely look to collect tariffs from large digital distributors like Netflix, Amazon Prime, and Disney, and movie chains like AMC Theatres and Regal Cinemas. Or he might try to collect the tariff from the big US studios, like Universal, Paramount, Warner, DreamWorks, Walt Disney, and Sony.

But those approaches invite the whack-a-mole problem. Foreign digital distributors are sure to spring up, offering films produced in France, Japan, Korea, and elsewhere to American households. And the big US studios lured abroad by foreign subsidies will sell their finished films to the new foreign distributors. Meanwhile, US movie chains caught by the tariff will suffer yet another blow to their shrinking fortunes.

Foreign countries will seize Trump’s tariffs as justification for their home-grown measures to limit Hollywood offerings. Screen quotas and ticket taxes are obvious tools. Such measures are particularly likely in the Global South. The 100 percent tariff proposal not only ignores the huge overseas earnings of Hollywood films but also fails to appreciate America’s soft power generated by the movie industry. Citing just two hits, Barbie grossed $809 million outside the US and Oppenheimer grossed $644 million. While the North American film market is large, it is dwarfed by the huge international market. In the end, retaliation against Hollywood and related services could sharply reduce the $37 billion trade surplus enjoyed by the US entertainment industry overall.

Trump is right: Foreign nations subsidize film production. So do US states, not only California but also Georgia, Illinois, New Mexico, New York, and others. But film production is hardly unique in garnering public subsidies. Universities are heavily subsidized through public funds (including tax deductions); so are hospitals, museums, civil aviation, maritime services, and research and development. The US government bailed out the financial industry during the Great Financial Crisis (2008–10).

Toward the end of the Uruguay Round of Multilateral Trade Negotiations (1986–94), World Trade Organization members agreed to study the problem of subsidies in the service industries. Nothing came of that initiative. During the Uruguay Round, the United States was the champion of discipline against public subsidies, but introspection revealed that US subsidies to its service industries would be highly vulnerable to countervailing duties. Members wisely agreed that applying countervailing duties to subsidized service imports would create commercial havoc, but not materially limit public subsidies. No bright line separates services for the public good from services that confer private benefits. In the end, it was tacitly agreed that national budget constraints provide the only meaningful discipline to subsidies in the service industries.

Movie tariffs are no better than countervailing duties. Moreover, the example of movie tariffs—if implemented—will create a precedent for unlimited tariffs against other services. The harmful outcomes, in terms of reduced competition and clogged commercial channels, will far outweigh any benefit. Like other Trump tariffs that directly and through retaliation hinder our competitive exports of goods, the 100 percent movie duty will likewise hurt our competitive service exports. Indeed, as the dominant world exporter of services, the United States will suffer huge losses.