The film industry was probably naive to think it would be spared from Donald Trump’s war on globalisation. If you believe Trump, every dollar being spent on foreign film crews, FX houses and film locations, every dime being spent by “runaway” film productions on foreign accomodation and food, is money being stolen right out of America’s pocket.
It doesn’t seem to matter that the end product – the films enjoyed by audiences worldwide – regularly deliver surpluses back to the American economy. Nor does it seem to register with the White House that Hollywood movies – and especially the ones shot on foreign locations with an international cast – are among America’s prime sources of soft power, right up there alongside blue jeans and Taylor Swift. This is a direct consequence of the fact that one of the world’s most beloved forms of entertainment is usually being experienced through an American lens.
Regardless, Trump has never liked Hollywood much. The feeling has been pretty mutual. To the neo-Nazi wing of the MAGA movement, Hollywood is a cesspool run by moneyed Jewish elites intent on corrupting America’s youth with messages of nihilism and depravity. Routinely, Hollywood has responded with similar disdain.
On screen, the hillbillies that J. D. Vance once described as friends and family have tended to be treated either as comic relief (eg the Beverly Hillbillies TV show) or as banjo-picking creatures of menace, as in the movie Deliverance. Decades ago, director Joe Dante amusingly set the carnage in his Gremlins 2 movie within a fictional Clamp Tower in New York City, a building shown as being owned by an idiotic narcissist called Daniel Clamp.
All of that baggage aside, it still seems batshit crazy for Trump to claim that films made in foreign countries pose a threat to Hollywood’s existence, and therefore to America’s national security. Reportedly, the US film industry amassed circa $US30 billion in revenues last year, and while movie theatre audiences have still not returned to pre-Covid levels, the only part of the industry that is in terminal shape are the movie theatre chains.
That’s why at this year’s Oscars ceremony, director Sean Baker urged people to go back to watching movies in theatres, because their existence was in peril. Ironically though, US movie theatres stand to be the sector of the industry that would be the hardest hit by any tariff-inflated rise in ticket prices.
Trump’s hyperbole though, is mainly just a means to an end. The existence of an existential threat is necessary for Trump to be able to invoke the sweeping powers available to the US President under either the International Economic Emergency Powers Act or the Trading With The Enemy Act. Yet even if Trump could manage to mount a credible case that foreign made films do really, truly pose an existential threat to the United States, tariffs are not one of the remedies listed under those laws.
So…it is still pretty unclear on what legal basis Trump could create a tariff regime for the film industry. Films are IP, and are not goods that you can require a film studio to slap an extra entrance fee on as they cross the US border. To date, the details of what, how and when of the tariff plan are still to emerge from the White House – so any implications for New Zealand’s film industry will not be known for some time.
What, how?
Presumably any entirely foreign made film entering the US market to compete for US eyeballs will have the 100% tariff slapped on its entire production budget. The trickier problems will arise when a nominally US production – or a film, say, co-financed by a combination of US and foreign backers – has also used foreign locations, multiple foreign government subsidies, foreign actors, film crews and FX houses etc en route to completing the final film. Untangling the offshore elements in a major film’s budget would be a logistical nightmare.
The more likely scenario is that the tariffs would be levied on the extent of subsidies provided by foreign governments that went into the film’s production budget. Globally, some of these subsidies can come in the form of up-front tax write-offs, and some (as in New Zealand’s case) are rebates offered subsequently as a fixed percentage of what the film production can show it has spent within the local economy.
Countries as varied as Ireland, Australia, France, Germany, Canada, Britain, Romania, Hungary etc offer versions of these subsidies. No doubt, foreign subsidies do compete directly with similar film subsidies offered by many American states, including California. Obviously, Trump’s tariff plan is an attempt to bring the “runaway”
US film productions back home.
Historically, this is not an entirely new idea. As Variety magazine pointed out this week:
When Canadian film subsidies were a new phenomenon in the late 1990-s and early 2000s [when our tax subsidies for Lord of the Rings were also being created] some of the more militant elements of Hollywood’s labour movement called for “countervailing tariffs” against studios filming in Canada. The idea was that such a tariff would bring jobs back to the US by offsetting the benefits of the subsidies.
At the time, this idea never got traction. To the wider industry, the benefits of foreign government subsidies plus foreign locations, reliable film crews and FX houses and cheaper labour costs, carried the day. Looking ahead, what would help the US to become significantly more competitive would be if the Trump administration offered federal film subsidies to augment the state subsidies.
Perhaps, the federal subsidies could be targeted at US post-production FX houses, in order to encourage digital advances that could have crossover benefits for US business, and/or for the US military. However, federal subsidies for Hollywood seem to be highly unlikely under the Trump administration. Besides, they would need Congressional approval.
Why has Trump gone down this road? There have been two immediate catalysts. Tariffs got a brief mention by Jon Voigt, one of Trump’s “special ambassadors” to Hollywood (the others are Mel Gibson and Sylvester Stallone!) in Voigt’s report to the White House last week on the film’s industry’s future prospects. Trump double and triple downed on the idea.
The other factor was that China, in its initial response to the US barrage of tariffs, had indicated an intention to reduce the number of US films granted access to Chinese audiences. As Trump tries to pay China back, the rest of the world is now at risk of being collateral damage.
Implications for NZ
Obviously, if tariffs deterred US film productions from using NZ locations, crews and FX houses, this would be detrimental to the country’s hospitality sector, as well as to all the current sectors of the film industry, in terms of jobs and lost opportunities for upskilling. Heretical though to be to the centre right, the film subsidies – both the early tax breaks, and the subsequent large budget rebate scheme – have been crucial to building one of the very few world class, value-added sectors of the New Zealand economy.
To date, there has been no word from Sir Peter Jackson on the Trump announcement. Presumably, and like everyone else, Jackson is waiting on further details of the proposal, and some assessment of its feasibility and likely commencement date. Whatever transactions in a film’s value chain do eventually get singled out as Ground Zero for the Trump tariffs, you can bet that Hollywood – the citadel of creative accounting – will be doing its best to mitigate the impact both on itself, and on any allies offshore that it deems to be essential.
For the meantime, no-one can stop Trump from subjecting America to yet another exercise in self-harm. In a sense, the film tariffs are a mirror for the wider disruptions in global trade. Thanks to Trump, New Zealand’s export sector is having to insert itself into new global supply chains. Likewise if the film tariffs ever do come to fruition, our film industry is going to have to hedge its bets, and look to the film industries of India and China and in the global South, in order to make up the difference. Crisis = opportunity.
Hooray for Hollywood !!
Robert Altman may have used the following song as bitter irony in the finale to his movie The Long Goodbye, but the original is beyond satire. The weirdness really kicks in at the 2.49 mark in this clip from the 1937 movie Hooray For Hollywood: