Why movie production has moved out of the U.S. — and what a tariff could mean for Hollywood

The US entertainment industry is facing a significant exodus of film and TV production to other states and international locations, driven by cost pressures and attractive tax incentives, resulting in a 26% decline in high-budget domestic projects. Former President Trump's revived threat of a 100% tariff on foreign-made movies, aimed at repatriating production, is met with substantial industry skepticism due to the logistical challenges of taxing services, potential for market disruption, and risk of international retaliation. Industry leaders and policymakers instead advocate for competitive federal tax incentives as a more viable solution to retain and attract production.

Analysis

The U.S. entertainment industry is navigating a significant structural shift, characterized by a production exodus from its traditional Hollywood hub. This is driven by economic imperatives, as major studios like Disney, Warner Bros. Discovery, and Paramount contend with tighter budgets following the pandemic, labor strikes, and the secular decline of lucrative linear TV revenue. The data indicates a tangible impact, with a 26% decline in U.S.-based projects costing over $40 million between 2022 and 2024, while regions like Australia and New Zealand saw a 14% increase. This migration is a rational response to aggressive tax incentives and lower costs offered by other states, like Georgia, and international locations such as Canada and the UK, which now rank higher than Los Angeles for filming. A proposed 100% tariff on foreign-made productions introduces significant uncertainty and is met with skepticism from industry analysts, who highlight the logistical difficulty of taxing a service and the substantial risk of international retaliation that could jeopardize critical foreign box office revenues. Consequently, the prevailing sentiment within the industry and among some policymakers favors a competitive federal film incentive program as a more viable and less disruptive solution to repatriate production.

Key Decisions for Investors

• Investors in major studios like Disney (DIS), Warner Bros. Discovery (WBD), and Paramount (PARA) should recognize the sustained margin pressure from escalating production costs and the ongoing shift of productions to lower-cost regions.
• The policy debate between a highly disruptive 100% tariff and a potentially constructive federal tax incentive represents a key variable; the implementation of a federal incentive would be a positive catalyst, whereas the tariff introduces significant downside risk from potential international market retaliation.
• Consider that the direct beneficiaries of this trend are companies providing production infrastructure, such as sound stages and support services, in tax-favorable locations like Georgia, Canada, and the UK, which are capturing production outflow from California.
• Given the high degree of uncertainty surrounding production costs and future trade policy, a cautious or hedged stance on the U.S. media sector may be warranted until a clearer policy direction emerges.