How will tariffs affect US and global film industry?
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Hello and welcome to World Business Report here on the BBC World Service. I'm Rahul Tan and we're going to be talking about another crucial decision that's been taken by OECD.

Open AI and ask, what will a Chinese player winning the World Snooker Championships mean for the sport? Could it see a lot more money coming in to it? But let us start with another day, another tariff, because this time Donald Trump wants to make movies in America great again. Our film industry has been decimated.

by other countries taking him out, and also by incompetence. Like in Los Angeles, the governor is a grossly incompetent man. He's just allowed it to be taken away from Hollywood. Hollywood doesn't do very much of that business. They have the nice sign and everything's good, but they don't do very much. A lot of it's been taken to other countries. So the US president, as you heard there, said the industry is dying a very fast death and he wants to put tariffs on films made abroad. So would films like this new release be tariffed?

This explains the handcuffs. It's still not clear why he's here. If we want to bring the world... Mission impossible there, the final reckoning. It's not obviously subversive. Donald Trump's Make America Great ambition. But it is produced overseas, Phil, mainly here in the UK. So would it be shown? So is the industry struggling? Here's our North of America business correspondent, Aaron Delmore.

If we go by the numbers, film production in the US is down 40% from where it was a decade ago. And another survey that I encountered this morning was showing that jobs in the film industry, including TV and movies, were down 25% since the year 2022. Let's bring in Wedbush Securities, Alicia Rees. Alicia, thanks so much for joining us here on the programme. Thanks for having me. Mission Impossible obviously would be shown, but...

You know, it could have tariffs put on it under this proposal. But as the day went on, things got a little less clear. Right. I would say there are far more questions than answers at this point. There's absolutely no clarity at this point on whether this would apply to new production, whether it would apply to production that has already been completed, where there was no opportunity for, you know, movements.

moving the production elsewhere. It also isn't clear whether this has to do with what percentage of the production was created overseas versus in the U.S. There's the studio aspect, and then there's shooting on location. There are certain films that must be shot on location, like A Mission Impossible, where you just can't move the production back to the U.S. because there's not the

the correct scenery, there's not the correct city for the storyline. So is that going to be a certain tariff percentage other than 100%? Maybe they used some studio time in the U.S.?

Again, far more questions than answers. And it's also IP. What part of the movie are they going to tariff? The box office? The ticket price? It's unclear if they can just go ahead and tariff IP. And I think that actually opens a whole can of worms in not just this industry but many others. We did have, didn't we, a White House spokesperson sort of moving back a little bit and say we're going to look at this in a bit more detail. But...

But, and you've raised a lot of questions there, if some sort of tariff is put on place, you look at some of the big studios, the likes of Netflix nowadays, how could this affect them?

again, it does, if this hits box office and that's where they're taking the tariff, it doesn't necessarily because it's what, what part of the window are you going to add the tariff to? Netflix often uses, you know, overseas production to, to fund. It's,

all of its content. It has like about 75% of its content is produced internationally. A lot of that's foreign language, but you know, a huge chunk is English language content that was just filmed elsewhere. Um,

The thing is, you know, how much of their, let's say their, you know, $8 billion or sorry, $18 billion budget for this year, how much of that is new content that's going to be produced? And is that tariff going to be on old content? Because that would go deep into all of the studio's libraries and which window, again,

more questions than answers here. And it, again, opens a big bag of worms. So I think what we're probably talking about is only newly produced content. So this is going to affect perhaps next year's content and it's just going to move studio work back to the U.S., reopen locations

Hollywood studios or just use them more, use Canadian studios less, do all the on-location shooting as much as before, as long as you can do that studio work or perhaps the editing and all of these other components.

Back in the US, perhaps that would solve the problem. It's very unclear at this point. Stay with this, Alicia, because I want you to listen to this. Now, let's take you to Hollywood. I've been speaking to Ned Thorne. He's a picture editor, writer and director from Los Angeles. What's he made of this? Of this?

There are simply things you can't achieve with any kind of efficiency or affordability without going to where that scenery is or where that talent is, maybe. What he might be referring to are those other sort of less tangible aspects of production, like, you know, in post-production, you know, it is certainly true that

because other countries have been able to offer more favorable tax incentives and credits and things like that and have these nationally funded film funds like the UK, Canal Plus in France. But so many countries are able to do that and offer those kind of less tangible aspects, VFX and post-production and things at basically better prices. And so studios are going where the bargains are. So he may be trying to refer to stuff like that and bringing that kind of stuff back home.

What do you make of that? Is that a good idea? Is tariffs the right way? Would it be better to offer similar incentives that other countries offer? Yeah, when he says something like we need to tariff a movie coming into the United States, it's not quite clear what he actually means by that or how that would actually work. And furthermore, it would really just increase costs to studios without really providing the benefit of better prices here at home. And so what

would be, I think, to me and to a lot of us, I think, a much better solution is to make it more attractive to do stuff here at home with tax incentives, with rebates, with film funds. The problem seems to be politically that sort

sort of goes against what he wants, what the kind of program he is. He's outlined this whole time. He doesn't want to have government funded arts, you know, and doesn't really want to have government have their be involved in that sort of thing. He'd rather turn it over to the private sector. But it doesn't sound like tariffs are really going to be

a solution that studios in particular would jump at because they don't really decrease the costs for them they just put a penalty on them I would imagine being around in Hollywood and being involved in the film industry that your phone has been buzzing quite a bit this morning a lot of people are talking about this what are people saying?

I think there's a lot of confusion. Obviously, here in LA, the industry has been kind of hollowed out over the last couple of years from COVID and from industry strikes, which were painful but pretty necessary to make some much-needed changes. But the downstream effect has been a hollowing out of the industry here in Los Angeles and California. And studios have worried about their bottom line, which is understandable. It's just unfortunate. So a lot of people would very much like to see some sort of move to bring business back to the US and to California. But

When the president says something like tariffs, it really just makes people scratch their heads and worry that it's going to make the problem a lot worse and more complicated rather than providing an actual, you know, real solution. And that's going to last. Ned there from Hollywood. Let's bring in Peter Jankowski, vice president for research and analysis at Arbor Financial Services in Chicago. And this sort of flip flop on tariffs on films. Not good news for some of those studios and their share prices at the beginning of the day.

Yes, it certainly hit Netflix particularly hard, as you'd expect. And actually, Netflix did not recover as well as some of the other studios. It was down, I believe, about 4% early in the day, finished the day down about 2%. Disney fared a good deal better. It was down 2% early and recovered the majority of that. It was only down about a quarter percent, of course.

Movies are a much smaller proportion of Disney's earnings than they are for Netflix. So in some ways, that makes sense that there was that difference in performance. Alicia, final thoughts from you briefly, if you don't mind. We do live in a world of a lot of AI now. So couldn't that stop people going abroad? Just use AI to shoot a lot of your films and create those scenes?

Well, it certainly lowers the cost on some fronts, but you can't create a whole production studio, the whole VFX, background editing, everything. It speeds up the process, but it doesn't move. And I think the tax incentives argument is the right one.

Instead of tariffs, there's no real way to make this work in an efficient way, in a way that actually brings prosperity to Hollywood in the way that Trump is even talking about, without just doing the tax incentives to bring them back.

So I think that's the only route. Alicia, lots of questions still need to be answered. So I think we'll probably be talking to you again quite soon as this story continues to develop. Peter, we were talking about AI there. Let's stay on that theme. Open AI ditching plans to convert to a for-the-profit business. This is quite a big story, isn't it? Because Elon Musk wasn't very happy with this idea.

No, he was not. It's kind of interesting what they've chosen to do is kind of a middle ground. I think the concern and the desire to move to for-profit status was to make sure that investors would get a return for the investments that were coming into there because the old structure placed a cap on the amount that firms that invested in the company could earn.

They're creating a new structure, which is not a full for-profit, but it does eliminate that restraint. So I think from that perspective, they should still be successful in attracting capital, and they've removed that impediment to attracting capital with the change they are making.

Unfortunately,

We see today that the role of science in today's world is questioned. The investment in fundamental, free and open research is questioned. What a gigantic miscalculation. I believe that science holds the key for our future here in Europe. Without it, we simply cannot address today's global challenges. From health to new tech, from climate to oceans, just to name a few.

Ralt Hoffman is a Polish-born American chemist who was one of the winners of the Nobel Prize for Chemistry in 1981. He's also one of the signatories to a letter warning about the economic impact of the slashing of science agency funding. The future will...

be severely damaged if any of these changes, or not if any, if some of these changes go into effect. In part, it is the economic reality. In part, it is the perception and the feelings of the scientists that this is not the place to do their best work. There is

So much uncertainty and fear and signs of things getting really bad in our time. Some of our grants are being canceled. Some new grants are not being entertained. The budgets of the

major science granting agencies. For instance, I no longer have a grant because I'm retired, but I used to get it from the National Science Foundation whose budget it is said will be slashed by 50%. I hope that doesn't happen.

The National Institutes of Health is behind the tremendous buildup of biomedical research in the United States, which has led to a high level of care, but also to, most importantly, to fundamental advances. We see uncertainty in whether our graduate students will come and how we can support them.

The whole picture looks quite disastrous in a way that I have not seen in my entire career, which at Cornell University goes back to 1965. It really looks bad. But even though it looks bad and that perception is growing, let's be honest about this. The pay levels are still much higher in the U.S. The size of the grants are still much higher internationally.

People may not be happy, but do you see droves of scientists leaving the US to go to the EU? I do not see droves. And incidentally, we should also keep about going to China or to India, another place which will grab some of the scientists from us.

I think the decisions that are now being made are those at the margin. I do not know of anyone who's made the decision for Europe based on the current events. But I do know that I have had very good scientists, ones to whom we've offered the job. And at the same time, they've been offered a place in the Max Planck Institute in Germany.

And after some agony, they decided to stay at the university in the United States. But I think the same decisions today would at the margin, which is where the good young scientists are in demand everywhere. The decision will be made, I think, for Europe, whereas it was made for an American university. Scientists have made a huge contribution, haven't they, to improving our lives and to improving economies?

They've invented things that have made a lot of money. Is there a danger of the US losing their preeminence there? Yes, I think there is a danger. That preeminence was built up

in substantial part on a wave of people like me who came from Europe, refugees after World War II, and who found here an opportunity to get an education free of interference for whatever reasons, and who found their way into society through education.

And then the research establishment was there to help them develop whatever things that they did.

I think that the situation in which we contributed, my generation, to American science, world science, and to economics is in very great danger of being lost entirely. The consequences will be economic as well as for basic science.

And I am worried that people in the future will speak of Trump's gifts to Europe or to China, meaning that these policies have encouraged people not to continue with the dream of America and of science and of people coming here but will be lost. Is it not inevitable that we will see

the likes of China and India, as their economies develop, do more to try and keep their scientists at home. Much of America's wealth has been built on people like yourself who have come in from other countries. Those countries will like to keep their best and brightest. Now, there's nothing wrong with that, isn't it? There is nothing wrong with that at all. And in fact, we took the best and the brightest. And sometimes we didn't pay back in the sense of they're going back to their countries.

I think people will, of course, stay in these countries. And we will nevertheless, from the point of view of America, lose some of the attraction that it had for the best people coming here, the best brains, the young people who will make the future. I think there is a danger.

Walt Hoffman there, co-recipient of the Nobel Prize for Chemistry in 1981. Peter Jankowski is still with us. This is an important story because we talk to you so much, don't we, about the U.S. economy being driven or the stock market in particular by those tech stocks which rely on these scientists. So if the scientists are moving elsewhere, that could be a problem for the likes of Silicon Valley.

It could be. I think the more serious issue is some of the restrictions on immigration rather than the public funding of research. I think corporations are more than willing to spend the money themselves to do the research. The more challenging situation for them is getting those talented researchers into the country.

And that's really where the problem is. The EU announcement, you know, it was good political theater, but realistically, they're only looking at increasing their research budget by 3%.

But going back, that's not going to cause people to move. Yeah. Yeah. No, maybe. But going back to that point that the professor was making there, that, you know, if you think your funding could be slashed and you might get more funding elsewhere and you think that universities are not going to be so welcoming, it may persuade some of those great minds to go elsewhere.

It could. It could. But I think the bigger problem is we're simply not open to allowing them to enter the country, period. That's the bigger issue. It's not the funding that's the issue. It's the ability to enter the United States that's the issue. Peter, stay with us. You're with World Business Report here on the BBC World Service.

We've had a lot of companies, haven't we, recently giving us their results, Peter. We're going to talk about Ford in a minute. But a lot of companies suspending their forecast for later this year because of uncertainty over the tariff policies. Have you seen this before to the extent that we've seen over the last few weeks?

I do recall, you know, back during the financial crisis, a number of firms suspending guidance. But I do not recall ever seeing something so related to government policy in the 30 odd years that I've been in the investment business. We saw Ford today suspending its forecast for 2025, also saying it sees a $1.5 billion tariff hit this year.

Yes, that's very substantial. And I believe GM already had suspended their guidance as well. So I think for automakers, it is a very serious issue because their supply chains were viewed as secure, particularly ones here within North America. And they've been totally...

you know, basically cast aside and no one really knows where the policy is going to go. There is, isn't there, as we're seeing from companies suspending those forecasts, a lot of uncertainty about the economic future of the world's largest economy, the US. Will we get some more clarity this week? We have a big decision by the US Central Bank, the Federal Reserve, on what it's going to do with interest rates and the comments that will accompany that will be very closely followed by people like you.

Yes, indeed. Yes, indeed. It's going to be how they're looking at the risks between employment and inflation. You know, Fed Chairman Powell has already been very outspoken in terms of some of the concerns he has.

and it'll be interesting to see where they stand on rates. I do not expect them to cut rates at this meeting, but people will be looking at their statements to see what policy might be at the next meeting. They certainly will. It's going to be an interesting day. If rates are not cut, it will be interesting

A lot of people will be looking at what sort of reaction comes from Donald Trump, the president. He's been pretty vocal about what he wants to happen. Let us end the programme by talking a little bit about sport and money because it's been a big day for snooker. Zhao Xingtong has become the first Chinese player to win the World Snooker Championship. Let's hear what he had to say. Emotional he was, of course, after he clinched victory a short time ago. I can't believe that. Yeah. Yes.

I can't believe what I do in this month. So, yeah, I'm very excited. Thank you. There we go, an ecstatic crowd there in Sheffield here in the north of England. He beat Mark Williams by 18 frames to 12 to clinch victory. Mark Williams was full of praise for his opponent. I got nothing but admiration for what he's done, come through the qualifiers. I haven't played for two years. What can you say? There's a new superstar in the game and he's over there.

He was over there. What does this mean for the sport to have a Chinese world champion? Jason Ferguson is chairman of the World Professional Billions and Snooker Association, the world governing body for the sport. This is a monumental evening in snooker and it's a real shift actually in what's going on in the sport and how it's globalising. To see this young boy come through and play so well, it's just an incredible moment and it's hard to describe what this will do for snooker in China. It's

Because there were a lot of people watching it in China. I saw some numbers, 150 million could be even more than that. Absolutely. I mean, I can tell you, having spent many, many years working in China, it will be being played on the buildings, it will be on the harbours, it will be on the shop fronts, on the huge screens everywhere. I can tell you, there will be crowds in the street watching this this evening, and you'll be amazed how many people will have stayed up all night to watch it, of course, being a long way ahead on the time zone.

How has China got so interested in snooker? What was it that triggered this interest?

I think generally speaking, I think China has fallen in love with snooker. Of course, it helps when you have national heroes. You know, many years ago, I can remember us working out there and there was very little infrastructure for snooker at all. They had a little bit of pool, which is a slightly different twist on pool as a cue sport. What happened? We went over there with a few events. We did some development work on the ground. And then all of a sudden, Ding Zhonghui became the national hero by winning a major event and

That was the boom time of when people really stepped up. But I think, you know, when you look around, not every nation plays football, not every nation is into rugby. You know, it's different everywhere you go. But China certainly has the love for snooker. I think it's to do with the sort of mental pressures of it. I think it's the technical skill. And I think it's the strategy as well. And the people just love it. They love to play it. They love to watch it. And that's just great for the World Snooker Tour.

And it's been important, hasn't it? Because sport needs sponsorship. It needs money coming in. And that's been a whole new avenue over the last few years for snooker. Do you expect more money to come in now from China? I'm sure the events are just getting bigger all the time, not just in China, but all over the world. Snooker events are getting bigger, more popular. We're getting bigger crowds.

bigger viewing figures. This is a really interesting time for the sport. What we found in China is the sport is so well treated, you know, on a level with anything. And what that brings in, it's brought in major brands. It is banks. It is financial institutions. It's real estate. You know, real premium brand sponsors are alongside us.

And that certainly helped us. And what we found is that we've generally attracted quite a more affluent younger audience. And of course, that's the target market for many people. The World Championship, synonymous with Sheffield. Any chance they could go to China? Well, I'm sure China will be interested in taking it. But to be quite honest with you, you know, this is what we export around the world. You know, we take a look at what we've done tonight. There is...

a kind of real Englishness about the traditions, the dress code, the way it's played, the sportsmanship. And, you know, and I think we have to sort of take on board that that is what's exported all over the world. And it's what's made snooker so famous. So we can't underestimate the value of Sheffield. And I certainly love it here. The players love it here. And we have had the best

17 days you could ever imagine. Jason Ferguson, a great day for snooker, great day for China. Quite a story as well, because you had a 20 month ban after getting involved in a match fixing scandal. Peter, I know in US sport, you've got a lot of people coming in, you know, baseball people coming in from Japan recently. And when you do have another interest from another part of the world, it does help raise the sort of money that's available for a sport.

It does. You know, certainly Major League Baseball started with games in Tokyo this year. They started their season. The National Football League has been working to expand overseas with matches being played in the UK and in Germany now. They're always looking for more audience. Yep. More audience means a lot more money, which is what a lot of sports mean.

are trying to bring in and hard when they're all competing against each other as well. That is it from World Business Report.