About half of the $3.7 billion spent on making 40 of Hollywood’s biggest hits in 2024, was spent outside of America. “US film production shows a gradual shift abroad, commonly known as runaway production. This move has accelerated in recent years due to high labour costs in the US, and an increase in generous tax incentive systems around the world,” says David Hancock, chief analyst cinema and movies, at Omdia while sharing the firm’s latest research with Business Standard. This has driven major US studios and smaller producers alike to move their film production to Canada, the United Kingdom and Australia among other countries offering tax credit or incentive schemes. Omdia research also shows that the US makes less than 10 per cent of the global output of movies, although it accounts for half of the $30.6 billion global film revenues in cinemas. (See charts) Japan, China, South Korea and India are among Hollywood’s biggest markets.
That is why President Donald Trump’s plan to impose a 100 per cent tariff on films shot outside the US could end up harming rather than helping the world’s largest movie industry. Just one round of reciprocal tariffs could hammer the market for US films. The stocks of every major Hollywood studiodropped soon after Trump posted his idea online on Sunday.
Secondly, “It is quite hard to see what the US government can actually tariff,” says Hancock. “The film itself is a digital file. The rights are often split many ways depending on who has financed it or is owed a share of the profits. There is currently a moratorium on digital transmissions within the World Trade Organization until the agreement is up for renewal in 2026. This includes movie downloads and electronic transmissions, which is how movies are distributed,” he says.
That means, “Either the US government has to ban US producers from working abroad. That would significantly reduce the number of movies being made and drastically weaken their film industry, or they have to create a federal tax credit scheme (or umbrella scheme) that US producers could use to reduce overall spend, maintaining industry output levels and relative competitiveness,” says Hancock.
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