The ongoing trade tensions between the United States and China are now impacting Hollywood, particularly following President Donald Trump’s recent escalation of tariffs on Chinese imports.
In retaliation, the Chinese government has limited the number of Hollywood movies permitted to screen in its theaters, a significant shift for a market that has traditionally been a stronghold for American cinema.
Major studios like DisneyWarner Bros. Discovery have felt the financial strain, with their stocks experiencing declines due to the uncertainty surrounding tariff implications. Trading early Friday reflected this downward trend.
Once a lucrative venue for U.S. films, the Chinese box office has seen diminishing returns for Hollywood productions. This shift is attributed to a rise in local film production, drawing audiences away from American films.
Ann Sarnoff, the former CEO and chairwoman of Warner Bros., remarked on the growing difficulties: “The Chinese market has become very challenging for U.S. studios. Rental rates at 25% were already significantly lower than other markets, and over the last few years, it’s become harder and harder to get your movie into the Chinese market.”
She noted a noticeable shift in audience preference towards domestic films. “This really affects the economics for U.S.-based studios,” Sarnoff said, explaining that studios can no longer rely on the Chinese market to enhance their film profits.
The end of the U.S.-China Film Agreement in 2017, which guaranteed 34 American films a year for release in China, further complicates matters, according to Aynne Kokas, a University of Virginia professor and author of “Hollywood Made in China.”
She observed that during the first Trump administration’s trade tensions, the focus was not on the film sector, even as the Chinese box office grew rapidly.
The production capabilities within China’s film industry have improved significantly, resulting in homegrown blockbusters. In 2019 alone, nine Hollywood films exceeded $100 million in revenue from the Chinese market, with Disney and Marvel Studio’s “Avengers: Endgame” earning over $600 million. In contrast, only eight American films have reached the $100 million mark in the last five years, with just one surpassing $200 million, as per Box Office Mojo.
Meanwhile, China’s domestic film industry continues to flourish. The recent success of “Ne Zha 2,” which became the first non-Hollywood film to gross $1 billion in a single market and over $2 billion globally, exemplifies this trend.
Sources from the industry indicate that while the reduction of Hollywood releases might slightly affect global box office totals, the primary concern is the weakening of currency values. International box office revenues increase in value when the dollar is low, though this correlates with rising operational costs. As Hollywood grapples with shifting tariffs and volatile market conditions, the ultimate ramifications of this trade conflict remain uncertain.
