When President Trump announced a 100% tariff on foreign-made films earlier this month, it was positioned as a bold effort to revive the American movie industry. But beneath the headlines lies a far more complex reality: in today’s global economy, few industries, Hollywood included, operate in isolation. Greg Stoller, Master Lecturer of Strategy and Innovation at Boston University’s Questrom School of Business, explores how a headline-grabbing policy has triggered ripple effects across global supply chains, fueling economic uncertainty, straining international relations, and creating tangible challenges for small businesses, consumers, and local communities.
On May 5, via reporting by Reuters, President Trump announced a 100% tariff on films produced outside the U.S., stating that “the American movie industry was dying a ‘very fast death’ due to the incentives that other countries were offering to lure filmmakers.” Like many of his administration’s tariff policies, the stated goal is to protect and incentivize domestic production.
But this decision, like others before it, overlooks how globally intertwined industries have become. As the Guardian put it, “Today’s film industry is a complex and globalized one, albeit one in which the U.S. retains much power. Determining the nationality of a film is a bit like asking which parts of a cow your hamburger comes from.” Even U.S.-made cars, for example, contain more than 50% of parts from abroad (USA Today).
According to the University of Sydney, the new tariff “would punish studios for using global infrastructure,” further straining an already vulnerable U.S. film industry. This is just the latest sector potentially forced to rethink its entire supply chain overnight.
Japan is also pushing back against U.S. tariffs, especially a 25% duty on car imports, to protect its auto industry and avoid political fallout ahead of national elections. While offering concessions like increased agricultural imports, Prime Minister Ishiba refuses to jeopardize domestic farming. Like Hollywood, Japan’s economy relies on global supply chains, making sudden tariffs a threat to both economic and political stability.
Sir Isaac Newton’s 3rd law of motion states, “For every action, there is an equal and opposite reaction.” While Hollywood begins adjusting, several short-term trade deals struck over the past week have offered a temporary release valve. Stock markets responded positively, pushing some indices into the black for 2025.
Still, these “deals” are best described as targeted tariff reductions, not permanent policy changes – set to expire in 90 days, and it’s unclear what will come next. Will they be extended, solidified, or reversed? No one knows. And even with these partial rollbacks, the tower of production still faces a baseline 10% tariff that shows no signs of being lifted anytime soon. For now, some leaders are celebrating. The U.K.’s Prime Minister Starmer noted: “This is going to boost trade between and across our countries. It’s going to not only protect jobs, but create jobs, opening market access.” China’s Xinhua echoed the sentiment, 本次会谈达成了联合声明，是双方通过平等对话协商解决分歧迈出的重要一步，为进一步弥合分歧和深化合作打下了基础、创造了条件。(“The joint statement reached in this meeting is an important step taken by both sides to resolve differences through equal dialogue and consultation, laying the foundation and creating conditions for further bridging differences and deepening cooperation”). For those seeking more details, I discussed these developments during my recent interview on national radio, via WBZ AM 1030 on May 13th.
While there’s cautious optimism that free trade will gain broader traction, the present reality demands attention to how these tariffs affect small businesses, consumers, and local economies.
Small Business Impact
For small businesses, the worst-case scenario comes in two forms:
- They can’t pass price increases on to customers and begin losing business. Unlike large retailers, small businesses rely on repeat customers and word-of-mouth, and their client base is typically local or regional.
- They split the cost difference with customers, cutting already-thin margins even further.
Perhaps the most damaging scenario is panic-buying—overpaying now to ensure future inventory, only to see prices stabilize later. These businesses are left holding inflated costs they may never recover.
The best defense? Proactive communication. Keep customers informed and offer them the chance to buy before price increases hit. The worst outcome would be having to renege on a signed estimate without notice.
Now is also the time to get creative. According to The Wall Street Journal Apple may absorb cost increases to keep iPhones affordable. Ford Motor Company is offering employee pricing to all workers. A friend of mine who owns a flooring company has locked in current prices for one week – if payment is made a week later. Nearly 90% of customers took the offer.
Consumer Impact
The big question for consumers is: Who will absorb the cost increases?
I used this example in my Questrom business class: I own a pair of Ecco dress shoes that cost $150. I’d gladly buy them again. But if they jump to $250, I might delay buying or look elsewhere. That’s a luxury I have—but a parent with kids constantly outgrowing clothes doesn’t.
Ideally, American-made products would be more affordable. But as noted earlier, even “domestic” goods often rely on global inputs. In theory, U.S.-based manufacturers have tighter control over intellectual property and can save on shipping. However, labor costs remain a major hurdle. During a recent trip to Vietnam with my Boston University students, we visited a U.S. multinational with labor costs 1/15th of those in the U.S. That’s hard to compete with unless product design is simplified or profit margins shrink.
According to the University of Pennsylvania, permanent tariffs could reduce U.S. GDP by 8%, costing a middle-income household around $58,000. Research at Yale University corroborates this, showing that just last week’s tariffs reduced GDP by 0.5%. The most significant long-term concern? Food prices. This isn’t just about eating out vs. eating in—it’s about putting food on the table amid stalled wage growth and economic uncertainty.
City and Town Impacts
Time Magazine notes that tariff uncertainty could raise mortgage rates. While consumers might rush to buy items like phones or cars before prices climb, home purchases are less likely, especially in low-inventory areas like the Northeast.
Reduced foot traffic could depress home values, and commercial rents may stay low, a downside for landlords, but a potential lifeline for struggling small businesses.
Not all industries will adapt equally. Returning to my friend in flooring: one of his wholesalers hiked prices 22%, even on stock already in the warehouse, citing tariffs. When confronted, they admitted it was an “oversight,” but trust was already damaged.
Exploiting tariff panic erodes customer loyalty. In cities with dining options, people will just go elsewhere; in smaller communities, they may eat out less. Let’s hope essentials like eggs aren’t next, and if prices rise, honesty must prevail over opportunism.
As tariffs ripple from movie sets to Main Street, the true cost won’t be measured in GDP alone—it will be felt in trust lost, choices limited, and futures constrained.
