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US President Donald Trump on Monday said he would be imposing 100 per cent tariffs on any or all movies that are made outside of the US, stating that foreign-made films are hurting the movie business in the US. When implemented, this will be the first instance of a US tariff on cross-border delivery of services.
“Our movie-making business has been stolen from the United States of America, by other countries, just like stealing “candy from a baby.”
California, with its weak and incompetent Governor, has been particularly hard hit! Therefore, in order to solve this long time, never ending problem, I will be imposing a 100% Tariff on any and all movies that are made outside of the United States,” Trump said in a post on Truth Social. Experts said that the tariffs on foreign-made movies qualify as a digitally delivered service, as film theatres traditionally used 35mm film prints that were physically transported to individual theatres and screened using projectors. Traditional projectors using film prints have now been replaced across most screens by DCPs or digital cinema packages, and thus, theatrical distribution of films across borders is now a digitally delivered service.
The tariffs on movies produced outside the US could have a widespread impact, as films are increasingly delivered in a digital format through digital applications directly to consumers’ personal electronic devices. U.S.-based digital platforms like Netflix, Amazon Prime, and Disney dominate this sector. However, other major content-producing countries like India (Zee5, JioHotstar), China (iQIYI, Viu) and South Korea (Coupang Play, TVING) have their own local players that also have a global presence.
A research report titled ‘Tariffs on Movies: Lack of Clarity on Implementation Design and Economic Motivation’ by Pritam Banerjee, head & professor, Centre for WTO Studies, released in May earlier this year, said that tariffs on movies could raise the risk of similar moves elsewhere globally.
“If one accepts the principle that tariffs can be applied on digitally delivered services in contravention of existing multilateral or bilateral commitments, it can lead to other countries taking up similar measures for reasons of revenue maximisation or for protecting their domestic industry,” Banerjee said in the report.
This possibility cannot be ignored, and old certainties of free and open markets for digitally delivered services – especially the non-application of tariffs or other discriminatory taxes on them by importing countries – would need to be seriously reviewed, Banerjee said, adding that historically, countries have avoided putting tariff barriers on Mode 1 or cross-border delivery of services.
“This is especially true of digitally delivered services. WTO members decided by consensus not to impose customs duties on electronic transmissions at the Second Ministerial Conference in May 1998. This so-called moratorium on electronic transmissions has been renewed periodically at WTO ministerial meetings, and remains in place as of date,” the report said. The US has been the strongest votary of this principle of moratorium on customs duties on electronic transmissions, and has often argued for making this moratorium permanent instead of the current practice of seeking periodic extensions. Experts said tariffs on movies also violate binding US multilateral commitments under the General Agreement on Trade in Services (GATS).
The US has also taken a binding commitment to provide market access and national treatment to cross-border delivery of audio-visual services (covering Motion Picture & Video Tape Production & Distribution Services, Radio & Television Services, Radio & Television Transmission Services, and Other Audiovisual Services) in the GATS.
This means the US is bound by its GATS commitments to allow the commercial streaming of foreign content without discrimination vis-à-vis domestic content. Any tax (in this case, a tariff) on foreign content is therefore discriminatory in that sense, and thus violates existing US GATS Commitments, the report said.
