Tariffs on Hollywood
Media Hit, 5/5/25
I was on Fox LiveNOW last night, talking about tariffs, this time the tariffs Trump threatened (?) on the film industry. But then he walked them back (I think?) once he realized that it’s a lot more complicated to tax some metaphysical thing called a “film” than it is to tax, say, car parts (even though that’s also much more complicated than one might initially imagine, too).
Talking Points
It’s no secret that the Hollywood film industry is in decline. We’ve seen pretty sizable job losses in the sector over the years, with some reports suggesting it’s down by as much as 40%. Part of this is no doubt due to the ending of certain COVID subsidies a year or so ago, but to my mind, there are two (maybe three) areas that have really caused this decline:
First, declining ticket sales in general, as media consumers have switched to streaming services.
Second, the heavily unionized state of the film making industry in general.
Third, other countries giving tax incentives to film there.
Declining ticket sales
The data is pretty clear, COVID kind of killed the movie theater business. Sure, it’s not dead dead, but it’s nowhere near as big as it was in, say, 2019.
Sure, there was an uptick in movie ticket sales once the pandemic abated a little bit (2022 or so), but I think that was pent up demand to get out of the house and go do something.
Once people realized that their house was way more comfortable than a movie theater (not to mention cheaper!), the small cost of waiting a few months to see the latest and greatest film just wasn’t worth it anymore.
Heavily unionized state of the film making industry
This isn’t about the actors themselves, this goes all the way down to catering!
Unions are great for the workers who have jobs in that industry, but they drive up costs for the rest of us.
Other countries’ tax incentives
Honestly, I don’t think this is nearly as impactful as Trump is alleging. Yes, other countries give tax incentives for films to be shot in their country and yes, that probably does steer business to their country.
But really, with high costs of production in the US accompanied by low ticket sales and abysmal sales of “physical media” (read: DVDs), filming content domestically was almost certainly declining anyway. This just steered filmmakers (who were already leaving) toward specific countries, not driving them out of the country to begin with.
By way of analogy, if a certain brand of cigarette had a sale, it might influence some current smokers to pick that brand instead of some other brand. But it’s not convincing non-smokers to actually start smoking.
So What Happened?
Andrew is a phenomenal host, but this is no surprise - he’s a fellow Michigander and a graduate of Lumen Christi High School, which my college track coach, Wild Bill Lundberg absolutely adored and took us to on “recruiting trips” constantly. He asked a lot of great questions, none of which I had in advance, but he really knows how to do an interview by asking a question, giving thoughts, but more importantly, letting his guest think for a second instead of asking rapid-fire questions.
Three particularly fun questions (paraphrased):
So do you think Trump is serious about this? That these will actually happen?
My answer: Look, trying to predict what Trump is going to do with regard to tariff policy tomorrow is harder than trying to predict the weather a month out. There’s just no way to know!
So if these tariffs do go into effect, will this return jobs to Hollywood?
My answer (many thanks to my colleague at AIER, Pete Earle, for this): What I think this will do is force Hollywood to make fewer movies per year and focus on making movies in well-established franchises, with prequels, sequels, and spin-offs, not unlike what we’re seeing today, but even moreso. So the Russo brothers would likely benefit tremendously from this tariff. Up and coming directors (and others in the film industry, for that matter), not so much.
Is this a national emergency?
My answer: In order to do what he’s doing, President Trump has to declare a national emergency. Once he does, it’s off to the races. But I think this one is absurd enough that the Supreme Court might actually take it up and I’m kind of hoping that he does and they do.
Traditionally, the Court has held that it should give a lot of deference to the president when it comes to “is this actually a national emergency?” Part of this is owing to the fact that the President (presumably) has more and privileged information that the Justices do not have. Another part is that the Supreme Court likely does not want to open up pandora’s box by allowing challenges to every declaration of a “national emergency.”
While this makes intuitive sense, it also requires a tremendous amount of trust by the Judiciary in the Executive. I think Trump may have overplayed his hand here.