Hollywood is dying – but insiders fear Trump’s tariff threat may hasten demise
At Sony Production studios in Culver City, an area of Los Angeles steeped in the movie business, a steady stream of cars and lorries comes and goes through the security gate.
It occupies the MGM lot which dates back to 1924. Gone With the Wind, The Wizard of Oz and Citizen Kane were shot here and, more recently, Interstellar and The Dark Knight Rises. But this is no longer the beating heart of movie making.
In Tinsel Town the bright lights of the film industry have been fading for some time. Production in Hollywood has fallen by 40% in the last decade, sometimes moving to other states like New Mexico, New York and Georgia, but more often outside the US entirely.
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A recent survey of film and TV executives indicates that Britain, Australia and Canada are now favoured locations over California when it comes to making movies.
San Andreas, a blockbuster film about a California earthquake, was shot in Australia. In America, a film about an Irish family settling in New York, was shot in Canada.
Although about a California disaster, San Andreas was actually shot in Australia. Pic: Jasin Boland/THA/Shutterstock
Trump’s movie tariff could deal knock-out blow to UK film industry, union says
The exodus of the film industry from Hollywood is mostly owing to economic reasons, with other countries boasting lower labour costs and more expansive tax incentives. But as productions have moved overseas, studios across Los Angeles are frequently empty and those who work behind the scenes are often out of work.
President Trump has approached this problem with a familiar reaction – sweeping tariffs, a 100% tariff on all foreign made films coming into the USA.
‘It’s a different kind of situation than producing cars overseas’
Justine Bateman is a filmmaker and sister of actor Jason Bateman. She is glad Trump is looking for solutions but does not understand how the tariffs will work. “I will say, I’m very glad to hear that President Trump is interested in helping the film business. But part of the problem is we just don’t have very much detail, do we?” she says.
“He’s made this big announcement, but we don’t have the detail to really mull over. He doesn’t even say whether it’s going to be films that are shown in the cinema or streaming movies, for example.
“Tariffs can be a profitable situation for when we’re just talking about hard goods, but something like a film and, particularly if you’ve got an American film that takes place in the south of France, you want to be in a particular location.
“So it’s a different kind of situation than producing cars overseas and bringing them back here.”
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At the Hand Prop Room in Los Angeles, they supply props for TV and film. The warehouse is brimful of virtually any prop you could imagine, from portraits of former presidents, to replica handguns to African artefacts and 18th century teapots. The walls are decorated with posters from some of the productions they’ve supplied, including Babylon, Oppenheimer and Ghostbusters.
Reynaldo Castillo believes the tariffs could be harmful to Hollywood unless properly thought through
‘It needs to be thought through’
In the past five years, the prop shop has been impacted by the COVID pandemic, by both the writers’ and actors’ strikes and the globalisation of the film industry. Business is at an all time low.
“It’s not helping when so many productions are not just leaving the state, but also leaving the country,” says Reynaldo Castillo, the general manager of the Hand Prop Room. “It’s Hollywood, we have the infrastructure that nobody else has and I think maybe to a certain point we took it for granted.
“I think we can all agree that we want more filming to stay in the country to help promote jobs. But you also don’t want to do something to hurt it.
“How does it work? Are there exceptions for X, Y, and Z? What about independent movies that have small budgets that are shot somewhere else that would destroy their ability to make something? It needs to be thought through and make sure it’s implemented the right way.”
The UK economy unexpectedly shrank in May, even after the worst of Donald Trump’s tariffs were paused, official figures showed.
A standard measure of economic growth, gross domestic product (GDP), contracted 0.1% in May, according to the Office for National Statistics (ONS).
Rather than a fall being anticipated, growth of 0.1% was forecast by economists polled by Reuters as big falls in production and construction were seen.
It followed a 0.3% contraction in April, when Mr Trump announced his country-specific tariffs and sparked a global trade war.
A 90-day pause on these import taxes, which has been extended, allowed more normality to resume.
This was borne out by other figures released by the ONS on Friday.
Exports to the United States rose £300m but “remained relatively low” following a “substantial decrease” in April, the data said.
Overall, there was a “large rise in goods imports and a fall in goods exports”.
A ‘disappointing’ but mixed picture
It’s “disappointing” news, Chancellor Rachel Reeves said. She and the government as a whole have repeatedly said growing the economy was their number one priority.
“I am determined to kickstart economic growth and deliver on that promise”, she added.
But the picture was not all bad.
Growth recorded in March was revised upwards, further indicating that companies invested to prepare for tariffs. Rather than GDP of 0.2%, the ONS said on Friday the figure was actually 0.4%.
It showed businesses moved forward activity to be ready for the extra taxes. Businesses were hit with higher employer national insurance contributions in April.
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The expansion in March means the economy still grew when the three months are looked at together.
While an interest rate cut in August had already been expected, investors upped their bets of a 0.25 percentage point fall in the Bank of England’s base interest rate.
Such a cut would bring down the rate to 4% and make borrowing cheaper.
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Is Britain going bankrupt?
Analysts from economic research firm Pantheon Macro said the data was not as bad as it looked.
“The size of the manufacturing drop looks erratic to us and should partly unwind… There are signs that GDP growth can rebound in June”, said Pantheon’s chief UK economist, Rob Wood.
Why did the economy shrink?
The drops in manufacturing came mostly due to slowed car-making, less oil and gas extraction and the pharmaceutical industry.
The fall was not larger because the services industry – the largest part of the economy – expanded, with law firms and computer programmers having a good month.
It made up for a “very weak” month for retailers, the ONS said.
Monthly Gross Domestic Product (GDP) figures are volatile and, on their own, don’t tell us much.
However, the picture emerging a year since the election of the Labour government is not hugely comforting.
This is a government that promised to turbocharge economic growth, the key to improving livelihoods and the public finances. Instead, the economy is mainly flatlining.
Output shrank in May by 0.1%. That followed a 0.3% drop in April.
Ministers were celebrating a few months ago as data showed the economy grew by 0.7% in the first quarter.
Hangover from artificial growth
However, the subsequent data has shown us that much of that growth was artificial, with businesses racing to get orders out of the door to beat the possible introduction of tariffs. Property transactions were also brought forward to beat stamp duty changes.
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In April, we experienced the hangover as orders and industrial output dropped. Services also struggled as demand for legal and conveyancing services dropped after the stamp duty changes.
Many of those distortions have now been smoothed out, but the manufacturing sector still struggled in May.
Signs of recovery
Manufacturing output fell by 1% in May, but more up-to-date data suggests the sector is recovering.
“We expect both cars and pharma output to improve as the UK-US trade deal comes into force and the volatility unwinds,” economists at Pantheon Macroeconomics said.
Meanwhile, the services sector eked out growth of 0.1%.
A 2.7% month-to-month fall in retail sales suppressed growth in the sector, but that should improve with hot weather likely to boost demand at restaurants and pubs.
Struggles ahead
It is unlikely, however, to massively shift the dial for the economy, the kind of shift the Labour government has promised and needs in order to give it some breathing room against its fiscal rules.
The economy remains fragile, and there are risks and traps lurking around the corner.
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Is Britain going bankrupt?
Concerns that the chancellor, Rachel Reeves, is considering tax hikes could weigh on consumer confidence, at a time when businesses are already scaling back hiring because of national insurance tax hikes.
Inflation is also expected to climb in the second half of the year, further weighing on consumers and businesses.
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