Trump's 100 per cent tariff on foreign films could hurt Indian cinema, experts warn

Donald Trump

On May 4, US President Donald Trump announced a 100 per cent tariff on movies produced outside the country, believing that the move would boost the number of films made in America. The result was chaos and confusion within Hollywood as well as film industries around the world, as Trump did not provide details on how the tariffs would be implemented. Even as the President softened his stance on May 5 and stated that a decision would be made only after he met with members of Hollywood, the news has sparked concern in the Indian film industry. After all, the US is a key overseas market that contributes significantly to the box-office revenue of major Hindi, Telugu, and Tamil films.

As mid-day reached out to producers and trade experts, they unanimously noted the ambiguity of the current situation as it is unclear whether the tariff would apply to payments made to acquire distribution rights of foreign films for their US release. There is also a lack of clarity whether tariffs would apply to movies on streamers as well. Trade expert Ramesh Bala pointed out, "Many American films are shot in Canada, Europe, and elsewhere to lower production costs. If the tariff applies to any part of the film made outside US borders, then many Hollywood films would technically qualify as foreign."

Immediate releases like Akshay Kumar and Jacqueline Fernandez's Housefull 5 is likely to be unaffected as the policy rollout will take time

America, a crucial market

Bala agreed that the move, if implemented, would be detrimental for Indian films. "The US market is crucial for Indian theatrical releases, especially because of the sizeable South Asian diaspora," he stated, pointing to blockbusters like RRR (2022) and Jawan (2023) that earned significantly from their US market. "High price points due to tariffs will dissuade distributors, reduce the number of films reaching theatres, and ultimately limit consumer choice. Small or medium-budget movies will likely skip theatrical release in the US entirely, missing out on a potentially lucrative market. The governments of affected countries, including India, will need to step in and engage in dialogue with the US administration to either seek exemptions or negotiate a more balanced trade approach," he stated.

Trade analyst Akshaye Rathi said it was too early to respond to Trump's announcement "with assumptions". He, however, said that this could serve as a trigger to fortify our own ecosystem. Citing the example of Russia, he said, "After the Ukraine conflict, Hollywood studios stopped releasing films in Russia, cutting off nearly 95 per cent of their box-office content overnight. The Russian government actively invested in its local film industry boosting both volume and quality. Within two-three years, they've managed to nearly return to pre-war box office numbers. The Indian film industry is still operating at a fraction of its potential."

The US collections of RRR and Jawan contributed significantly to their box-office earnings. Pics/AFP, PTI, Instagram

Don't panic before the policy rollout

Housefull 5 will be one of the first big Bollywood releases in the wake of the announcement. With Akshay Kumar, Abhishek Bachchan and Riteish Deshmukh leading it, the laugh riot is targeted as much at the Indian audience as at the diaspora. Diljit Dosanjh's Sardaar Ji 3, slated for June 27 release, too is aimed at the diaspora. Bala assumed the films would go unscathed, reasoning, "The proposal is under consideration and is part of a broader USTR [United States Trade Representative] investigation. There is no final rollout date. This gives a buffer, but later films will have to review [their distribution plans]."

An executive from Jio Studios, who did not wish to be named, dialled down the fear with facts. "The US market contributes only around four per cent to the total box-office earnings of an average Indian film. So, the overall damage is limited. If the tariff doesn't apply to OTT platforms, it might even benefit producers, as they can sell their films directly to streaming services."

Supriya Yarlagadda, executive director, Annapurna Studios, a production and distribution house from South India, admitted that the policy will hurt not only Hindi films, but also their South counterpart. "US is a large distribution territory for various Indian language films. While the latest news is of concern, we will have to wait for the policy details to emerge before panicking," she said.

A new territory to capture

A question on the mind of many is: Can China or Japan replace the US? Bala said a hard no. "China's annual foreign film quota [around 10 titles under revenue-sharing rules] makes it an unreliable replacement for the US. Other regions like Australia and Southeast Asia are much smaller. The US remains the only overseas market with scale, infrastructure, and a sizeable diaspora audience."