Trump Tariffs Impact on Hollywood: Not Much ‘Direct Harm’ — but a Resulting Recession Would Be ‘One-Two Punch’ for the Entire Sector

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The significant tariffs President Trump unveiled on Wednesday won’t initially boost costs for most media and entertainment firms directly. However, indirect consequences such as reduced American consumer spending and tightened advertising budgets could significantly impact Hollywood‘s earnings, predict experts.

Concerns over potential recessions due to the recently implemented Trump tariffs manifested themselves through the widespread stock market decline on Thursday.

According to Matthew Dolgin, a senior equity analyst at Morningstar, Trump’s reciprocal tariffs might not inflict significant direct damage on media and entertainment companies, with exceptions like Apple and Roku whose hardware sales make up a substantial portion of their income. Nevertheless, the majority of these firms don’t rely on selling goods in general. However, they do heavily depend on consumer spending, so an economic downturn caused by tariffs could potentially hamper their operations.

Firms facing increased tariffs won’t be able to shoulder these additional costs themselves – that would lead to higher expenses for consumers. In response, it’s expected that consumers may cut back on their spending in areas like media and entertainment, as mentioned by CJ Banagh, a principal in PwC’s telecom, media, and technology division.

As a movie critic, I’d rephrase the statement as follows:

During an economic slump, advertising budgets tend to shrink significantly, which directly impacts the media and entertainment industry. This could prove a double whammy for Hollywood producers, given the expected decline in both consumer spending and ad dollars. In this challenging scenario, the key is to maintain the quality of our content and the overall viewer experience, while also finding ways to streamline operations and work more efficiently. Absolutely no compromise on the former, but a careful approach to the latter is crucial for survival.

According to Banagh’s findings, businesses that refrain from reducing their marketing efforts during tough economic times tend to perform significantly better compared to those that make cuts.

As Europe deals with the economic repercussions of tariffs and adjusts to the U.S.’s fresh strategy towards international disputes, there could potentially be a change in European sentiment towards American films and media, according to Maggie Switek, an economist and senior director of research at the Milken Institute, a neutral think tank. It remains unclear what the lasting effects of these sentiment changes might be, but it’s crucial to monitor public opinion trends to get a clearer picture of what lies ahead for Hollywood.

Before Donald Trump declared his “Liberation Day” tariff plan, American consumer confidence was already slipping. In fact, The Conference Board’s Consumer Confidence Index decreased by 7.2 points in March, indicating a fourth straight month of decline. Trump’s announcement about tariffs could add more volatility to the markets, which might influence consumer opinions, Switek noted.

On Thursday, some major U.S. media and entertainment companies experienced significant drops, matching or exceeding the market’s decline. These included Disney (dropping by 9.3%), Warner Bros. Discovery (with a loss of 13.3%), Live Nation Entertainment (-6.4%), and Roku (-15.6%). This slide occurred in tandem with a substantial dip in indexes such as the S&P 500, which dropped by 4.84%, and the Nasdaq, which fell by 5.97%.

In simpler terms, the majority of Disney’s profits come from its theme parks and experiences. If there’s an economic downturn (recession), tourism is likely to decrease, resulting in fewer visitors at Disney’s parks. Moreover, international tourism to the U.S., especially from Canada, might decline due to strained foreign relations. Similarly, Live Nation could also be affected since people might cut back on concert attendance during tough economic times. However, despite a potential drop in theme park revenue, Disney’s growing streaming business should offset this weakness, according to analyst Dolgin.

Concerning the decline in WBD’s share price, Dolgin mostly blamed it on their heavy debt load. He suggested that many stocks of companies with high levels of debt might be vulnerable, potentially due to concerns about tighter credit conditions.

In regards to companies like Roku that deal in Media and Entertainment stocks, it’s important to note that they source their TVs and devices from various international locations such as China, Southeast Asia, Mexico, and Brazil. However, it’s crucial to understand that Roku’s device business operates at a loss; the real profit comes from advertising sales and revenue-sharing agreements. These sources of income are said to be immune to tariffs directly, according to Dolgin. Nevertheless, if there is a decrease in advertising spending, the company may feel the impact, making the stock less appealing.

Manufacturers of consumer electronics are set to feel the brunt of Donald Trump’s tough tariffs imposed on China and several Asian nations. The Consumer Technology Association, an organization representing businesses that sustain over 18 million jobs in the U.S., has strongly criticized Trump’s proposed policy.

Gary Shapiro, the CEO and vice chair of the Consumer Technology Association, stated that President Trump’s broad and mutually imposed tariffs are essentially large increases in taxes for American citizens. These tariffs could lead to inflation, cost jobs in local businesses, and potentially cause a recession in the U.S. economy. The tariffs will likely increase consumer prices and prompt our trading partners to respond in kind. As a result, American citizens may experience a decrease in their wealth due to these tariffs.

Shapiro went on to say, “This isn’t going to be a golden era, rather it will resemble the worldwide economic disaster of the Smoot-Hawley tariffs from the 1930s, which will particularly affect lower-income and hardworking individuals in America. Let me make this clear: The average American consumer, family, and worker will experience genuine hardship, and those policymakers in Washington who implement such decisions will face consequences at the ballot box.

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2025-04-03 23:17