A possible decision by the United States to impose a “tariff” or other similar financial liability on films produced outside its borders may lead to a drastic slowdown in the international films produced in Hungary similar in scale to that during the Covid epidemic.
On Sunday, Donald Trump announced the introduction of a 100% tariff on films produced outside of the United States. He cited the various tax discounts and other incentives offered by various countries around the world as the basis of his decision, which have led a number of American studios to shoot abroad. Trump was quoted as saying “the US movie industry is dying a very fast death,” something he called a National Security threat.
The details of the measure are as yet unknown
Trump has authorised the competent government agencies, including the U.S. Department of Commerce, to work out the details necessary to introduce the measure. For now, we know very little about the details. For example, we do not yet know when the financial burden will be imposed, with what effect, and on what costs, if at all. One of the many issues that need clarification is whether the income received by American actors working in Hungary (which is taxable in Hungary) and the range of services received from the US would also be included in the tax base or if it would apply to non-US elements only.
Difficulties in enforcing Trump’s film tariff
At first glance, the measure outlined in the President’s announcement has a number of flaws, and it will probably be very difficult to apply and enforce, as film production services cannot be as clearly defined as, for example, the manufacturing of a product, where the rules on determining origin allow the tracing of the costs of parts and origin. On the one hand, this makes it quite difficult to determine the base used for calculations; on the other, it calls into question whether the burden is actually a tariff by nature.
In addition to the above, the concept also fails to take into account the fact that American film productions choose international shooting locations not only because of discounts and incentives. In light of the topic of the film, the decision may also be influenced by other features of the given country, such as its architecture, culture, natural attributes, and climate.
Bad news for Hungarian film production and the Hungarian economy
Currently, Hungary is among the top 10 film production locations in the world. The main profile is servicing overseas studios; in Europe, the UK film industry alone may represent a greater volume. Approximately 85-90% of film-related expenditures in Hungary originate from the US and are in connection with American productions. That is why Trump’s announcement is very bad news for the entire Hungarian film industry.
If the measure is enacted, it is expected to cause greater damage than the 2023 writers’ and actors’ strike. Its effects may be similar to the shutdown experienced during the Covid epidemic, threatening not only the livelihoods of the 20,000 people employed in the industry but negatively impacting the entire Hungarian GDP with a loss of one hundred billion forints from the budget.
This is the time for Hungarian lobbying
Although the US President talked of a tariff on Sunday, it follows from the above that this is not a tariff in its traditional sense. This means that if introduced it will not be subject to the European Union’s single tariff rules and—at least in theory—Hungary may have a possibility to secure an exception. That is why it would be very important for the Hungarian government to take action as quickly as possible and, exploiting the good relations it has with the Trump administration, secure Hungary’s interests by diplomatic means. Chances are improved by the fact that the planned measure seems to be primarily aimed at Canada, Australia, and Great Britain as main shooting locations, in which regard Hungary does not qualify as a major-league player.