Hollywood is in trouble, and not just because of tariffs.

In Home Alone 2, he settled for a cameo. Now Donald Trump has taken on the role of Hollywood's savior. "The movie industry in America is DYING," the US president posted on Truth Social on May 4. The "concerted effort" by other countries to attract film production not only harms the economy but also poses a "national security threat," he claimed, as foreign films are used as propaganda. To remedy these ills, Trump proposed a 100% tariff on foreign-produced films. Read also Trump is proving disastrous for Big Tech. The Economist In Hollywood, the president's announcement sparked a cascade of abuse. The film and television industry is highly globalized: a movie can be written in Los Angeles, co-financed by Wall Street and international investors, and shot in multiple countries. According to the Motion Picture Association, the U.S. entertainment industry generated $22.6 billion in exports in 2023. If the United States imposes tariffs on foreign films, other countries could retaliate. It's unclear how the tariffs would work, or whether Trump's improvised proposal would ever become reality, but such levies could severely disrupt an industry already reeling from declining theater attendance and a difficult transition to streaming. The studios, already struggling financially, would have to pass on some of the additional costs to moviegoers, who have so far been the biggest beneficiaries of the internationalization of cinema. American studios like to shoot abroad because it's cheaper. It also allows them to choose from a wider variety of spectacular landscapes and work with local experts, which translates to better films. (The United Kingdom, for example, specializes in visual effects.) Most moviegoers don't care whether the next Avengers movie or the next Disney remake is shot in Los Angeles, Vancouver, or Budapest, as long as the final product is entertaining. Scene from the first season of 'Squid Game' NETFLIX / Europa Press And thanks to streaming platforms, viewers now have access to a wide variety of stories from around the world: Netflix's most popular series is Squid Game , a South Korean dystopian drama that has racked up more than 3.5 billion hours of viewing as of 2021. In the global marketplace of ideas, American producers can find new collaborators and inspiration. Hollywood may not have liked Trump's proposal, but many writers, directors, and lawmakers agree that he has identified a real problem. Film and television production has declined worldwide following the writers' and actors' strikes of 2023; however, in Southern California, production has plummeted. (The wildfires earlier this year dealt another additional blow.) According to FilmLA, which tracks filming in the Los Angeles metropolitan area, the region hosted fewer shooting days in 2024 than in any other year except 2020, when the pandemic forced a halt to most shoots. California remains the US state with the most film and television jobs, but its share is shrinking. *Until September Sources: California Legislative Analyst's Office; BLS; FilmLA *Until September Source: California Legislative Analyst's Office; BLS; FilmLA *Until September Source: California Legislative Analyst's Office; BLS; FilmLA Hollywood is a generic term for the film industry, but it's also a district where studio workers can see a sign with that name written in white letters on a hillside. Angelenos have long worried about losing control of the city's most famous manufacturing sector. Production began fleeing Los Angeles to Canada in the 1990s, amid a strong dollar, according to Kevin Klowden of the Milken Institute, a Santa Monica think tank. In the 1990s and early 2000s, states like Louisiana and New Mexico began offering tax incentives to attract production. Klowden notes that Breaking Bad, set and filmed primarily in Albuquerque, New Mexico, was originally scheduled to take place in Riverside, California. Eventually, in 2009, California also began offering its own tax incentives. Many audiovisual products are produced outside the US because it costs less: “It’s cheaper to fly 100 Americans to Ireland than to go to the Fox studio.” However, they are less generous than those offered elsewhere. The UK offers 34% tax relief for high-end films and TV shows. It's one of the reasons blockbusters such as Barbie , Deadpool , Wolverine and Wicked were filmed there. Last year, British production spending was £5.6 billion (€6.6 billion), a 31% increase from 2023; much of that spending came from US companies. Meanwhile, California has become increasingly expensive. Film industry workers earn approximately 20% more in the so-called Golden State than the national average. The workforce is highly unionized, and studios must pay workers enough to afford living in one of the least affordable housing markets in the United States. Actor Rob Lowe has explained why his game show, The Floor, is filmed abroad: “It’s cheaper to fly 100 Americans to Ireland than it is to go to the Fox studio.” An image of the strike against Hollywood studios in 2023 ROBYN BECK / AFP Some industry workers are already leaving Los Angeles, slowly eroding the network effects that have helped the city fend off other aspiring film capitals. The decline in production means writing jobs are scarce. Sean Collins-Smith, a television writer, relies on royalties from his work on episodes of the police drama Chicago PD. As a writer, he says, “if you don’t work for two or three years, you have no choice” but to leave. Trump already appears to have backtracked on his tariff promise, but it's unclear what might replace it. Jon Voight, an actor and one of the president's "special ambassadors" in Hollywood, wants federal tax incentives. The uproar in the movie mecca caused by Trump's Truth Social post has given way to cautious optimism. Movie moguls would love federal aid; and Gavin Newsom, the Democratic governor of California, backs them. In response to Trump's tariff proposal, Newsom proposed that Uncle Sam grant the industry $7.5 billion a year. "The president was obviously excited about tariffs," says Ben Allen, a California state senator who represents much of West Los Angeles, "but there are other ways to help." Read also Trump drives American scientists into the arms of Europe The Economist Why is Trump so interested in helping Hollywood? Foreign films don't pose a security threat; as propaganda tools, they are far less potent than social media. Elevating Hollywood above its foreign rivals could be considered an "America First" policy; industry bigwigs are pushing for it, comparing its problems to those of the Rust Belt. Russell Hollander, head of the Directors Guild of America, claims that enough film production is fleeing Los Angeles that "Hollywood could become the next Detroit." However, allocating federal aid to filmmakers requires congressional approval. Given that the industry is concentrated in liberal states like California and New York, the proposal may not appeal to Republican lawmakers. Even if Congress were to act, California would have to compete with other states' incentive plans. New York is considering expanding its film tax breaks, and California could follow suit. However, the California Legislative Analyst's Office has found "no convincing evidence" that such incentives boost the state's economy or that they pay for themselves in the long run. Squeezing taxpayers to pamper the world's most glamorous industry can be difficult to justify during election time. In politics as in film, when the credits roll, tears sometimes flow. © 2025 The Economist Newspaper Limited. All rights reserved Translation: Juan Gabriel López Guix