Trump’s movie tariff has markets ‘prayin’ for me, boy. And you better pray good.’
(Originally published May 6 in “What in the World“) And they say foreign films can’t find an audience in the U.S.
Trump clearly found a plot that resonates. After saying he was slapping a new, 100% tariff on “all Movies coming into our Country that are produced in Foreign Lands,” Trump shattered the latest rally in financial markets. The benchmark S&P500 index dropped 0.6%, Treasuries fell, and gold resumed its climb.
Trump’s film tariff announcement followed a meeting at Mar-a-Lago last weekend with actor and Trump supporter Jon Voight of “Midnight Cowboy” and “Deliverance” fame. In January, Trump appointed Voight, who has been advocating for the return of movie production to the U.S. from cheaper locations abroad, as one of his “ambassadors” to Hollywood. Voight had reportedly suggested to Trump that he heed calls by the International Alliance of Theatrical Stage Employees union and the Motion Picture Association of America to provide tax incentives to keep more production in the U.S.
Trump listen. Trump hear. Trump hear “tariff.”
Yet the U.S. enjoys a $15.3 billion surplus in its trade of films and TV shows in 2023, and runs a surplus with literally every other country that is bigger than its surpluses in health and insurance, telecoms, or transportation. So, Trump can reasonably expect U.S. trading partners to levy “reciprocal” tariffs on U.S. film and TV imports.
Investors had been celebrating the 12% recovery in stocks since their post-“Liberation Day” nadir April 8. But Trump’s latest announcement reminded investors that the White House remains occupied by a deranged lunatic. The S&P500 remains 5% lower than it was the day before Trump’s inauguration. Trump may have backtracked on some of his tariffs, but not all. And he obviously remains inclined to impose more whenever the whim strikes and he isn’t busy undermining the rule of law or defying the U.S. Constitution. His hand, after all, wasn’t on that Bible when he took the oath of office.
Investors thus continue to pull funds out of U.S. stocks, pulling a net $15.6 billion from U.S. equity funds in the last week of April, the largest net weekly withdrawal since last December.
And foreigners are avoiding the U.S. Goldman Sachs and JPMorgan now predict that falling foreign tourist numbers will cut as much as 0.2% to 0.3% off U.S. GDP. Spending by foreign visitors last year accounted for an estimated 0.7% of GDP. That decline will thus contribute to the other downdrafts—like weaker spending and investment by U.S. businesses and consumers—already pushing the U.S. economy into a holler.
Cue the dueling banjos.