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Man, I was all geared up to write another edition of “Most Important Story of the Week” so I could discuss the interesting content release news stories that I’ve been storing up this year—Bond! Narnia! Bourne! DC! Lord of the Rings!—not to mention continuing my recap of streaming viewership in 2024, then…
Wham! Tariffs. Trade war!
As I’ve had to write a few times this year, this newsletter doesn’t usually focus on national politics or the economic state of the country or world. (I write about the economy and politics in exactly one article a year, though this year, I’ve already had to write about politics twice in 2025.) But I, like almost every pundit out there, think that these tariffs will, obviously, have a huge effect on the global economy. But you come to me for entertainment industry analysis, so here’s a take:
I don’t think Hollywood is nearly worried enough about the coming trade war.
The American entertainment industry is uniquely vulnerable to retaliation from other countries. You wouldn’t know this, though, by reading the traditional entertainment press, Hollywood trades or EntBiz newsletters. While several articles have looked at the pending tariff war, they mostly focused on the impacts of a possible recession, since Hollywood doesn’t sell physical goods anymore.
That’s a 20th century mindset in a 21st century world.
Virtually everyone is making the same mistake about the coming trade fights, focusing on physical goods, not digital items or services. Today, I’m going to look at this issue a pinch more creatively, trying to update our mindset for a digital world. And since this issue is so important, it will take up the entire column this week and a second article tomorrow.
How Will the Trump Tariffs or a Coming Trade War Impact Hollywood?
So far, the consensus is that Trump’s “Liberation Day” tariffs could tank the economy, and a tanking economy is bad for Hollywood. That’s about it when it comes to how these tariffs might impact Hollywood. Google “tariffs Hollywood” and the results are seven pages long. Most of the major entertainment industry podcasts ignored this news story entirely.
If someone wrote about the tariffs, their takes could best be summarized by this Variety headline:
THR had a similar take: “The media business might not be built on imported physical goods, but many of its largest advertisers are, and the ad business is already beginning to feel the pain…”. So did The Wrap, Deadline, Bloomberg and this possibly AI-generated response on Business Insider. The tariffs might cause a global recession, and that’s bad for the entertainment industry.
Again, that’s such a 20th century way of looking at it.
A Failure of Imagination: Goods vs. Services
After Trump’s big “Liberation Day” speech, a bunch of people tried to figure out how the administration got their “reciprocal” tariff numbers. They soon realized that the Trump administration used America’s trade deficit in goods with other countries. But we don’t just trade in goods with other countries; we also trade in services. As Paul Krugman (and others) explained, if you factor in services, America’s trade deficit with many countries largely disappears.
Services matter. While America runs a trade deficit, we run a trade surplus in services of over $250 billion. And it’s a vulnerability too few analysts have taken into account.
To use a military analogy, the current trade wars are being fought on “conventional” terrain. That terrain is durable goods, either raw materials, agricultural foodstuffs, or manufactured products. Few people are thinking or acting in terms of digital goods and services.
If you consider the trade wars a “war”, then our former trading partners have become our enemies. And if your enemy has an advantage on the current battlefield, then the smartest strategy is to change the terrain. Thus, if they act strategically optimal, Europe, China, Japan and others should shift the battlefield to where America is weakest: our services, IP and digital goods. That’s where we are most vulnerable. Asymmetrically vulnerable.
Of course, this would be a big, big shift in how trade wars are typically conducted. When it comes to war, though, big paradigm shifts often change the entire battlefield. The longer a war drags on, the more likely it is that one of the sides upends the board, if you will.
And that’s the main strategic takeaway I can foresee here:
If this trade war drags on, America’s former trading partners/now strategic opponents could see an opportunity to hurt America by focusing on IP and digital goods, a strategic shift that could be devastating for Hollywood and Big Tech.
To continue the war analogy, when you’re at war, you want to catch your enemy off guard. Reading the trade coverage, that could happen here. Both our political leaders (who launched this trade war) and most people in Hollywood have downplayed any potential for blowback. That’s a huge failure of imagination for how this trade war could spiral out of control and cause permanent damage, especially considering that, in war, normal conventions go out the window.
To reiterate what I wrote above: I am NOT predicting that this will happen, or even putting the odds above, say, 5-10%. But the longer a trade war drags out, the more likely it is that, at some point, other countries target America where it is most vulnerable.
So if Europe, Japan and other countries decided to retaliate, how might it play out? What tactics would they consider? Let me provide some specific, concrete examples.
The IP Targets of Opportunity in a Tariff War
Target 1: Global Box Office
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