In recent weeks, President Donald Trump again suggested imposing tariffs on films produced outside the United States. The idea quickly captured headlines, sparking concern across Hollywood about potential consequences for global productions and U.S. studios that rely on international filming locations.

At its core, the proposal would tax films made abroad and imported into the U.S. — a concept aimed at reshoring production and protecting domestic labor. However, industry experts are noting that tariffs on film production are unlikely to pass.

WHAT FILM PRODUCTION TARIFFS WOULD MEAN IF PASSED

If enacted, a film tariff could drastically change the entertainment industry. Hollywood’s major studios produce blockbusters overseas to take advantage of global tax incentives, diverse locations and specialized talent. Tariffs on foreign-made productions would:

• Increase production costs and potentially limit creative flexibility
• Reduce competitiveness in global markets
• Destabilize a sector in which the U.S. maintains a trade surplus — entertainment exports

Because most modern films are delivered digitally, enforcing such a tariff would present difficulties. Unlike physical goods crossing a border, digital files are transmitted electronically, which means there is nothing tangible to tax or intercept.

REASONS WHY TARIFFS ON ENTERTAINMENT ARE UNLIKELY

Under existing trade law, the U.S. cannot impose tariffs on intangibles, such as digital films, without an act of Congress. In addition, the World Trade Organization has maintained a moratorium on tariffs for digital transmissions for nearly three decades. Any attempt to override this could violate long-standing international agreements.

Even if Congress attempted to legislate a digital-media tax, such a measure would face significant opposition. Industry experts have pointed out that the only known mechanism for implementing a policy like this would be through a digital-services tax similar to those in parts of Europe, which presents an entirely different framework that would require years of negotiation and implementation.

THE BOTTOM LINE

For now, the proposed film tariff is highly unlikely to move forward without a dramatic shift in both domestic and international law. However, if Congress were to take up legislation along these lines, entertainment industry leaders should monitor developments closely.

TALK TO GHJ

While the current risk is low, GHJ’s Entertainment Practice continues to monitor trade policy and global production trends that could impact studios, distributors and investors. To discuss how potential policy shifts might affect your business, contact GHJ’s team of experts for guidance.