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Hong Kong Intelligence Report #156 The Great Reshoring of Film Production: Trump 2.0, Film Tariffs, and Hong Kong

Open-source intelligence (OSINT)

A muscular man in dark robes holds a glowing red lightsaber, flanked by two eagles and U.S. flags, creating a powerful, intense scene.
PHOTO: President Donald Trump is like a Jedi Knight from the Star Wars movies. © POTUS

🔻 IMPORTANT - Film Tariffs


▪️ This brief analysis examines the Trump 2.0 film tariffs in relation to the Hong Kong "film industry." In conclusion, President Donald Trump's film tariffs are in the vital interests of American film workers. These tariffs are aimed at creating more domestic jobs and are part of the nationwide reindustrialization efforts of the most reformist administration in the United States of America. While it is true that free trade policies are systematically accompanied by domestic protectionism, manifested in tariffs and non-tariff barriers, this does not negate the importance of the aforementioned tariffs. The efficacy of President Donald Trump's film tariffs is contingent upon the absorption of tax credits by returns, thereby offsetting the augmented costs associated with domestic production. This is not an act of selfishness or irrationality. Rather, it is the stance of conservative, nationalist, and patriotic reformists who are determined to counter the consequences of free trade globalists.

China has emerged as the preeminent proponent of this two-tiered trade policy, which is characterized by a blend of free trade and protectionism. This approach was initiated in the film industry following 1994 and was solidified in 2001 with China's accession to the World Trade Organization (WTO). The structure incorporates a variety of features, including a revenue-sharing base, guidelines for co-productions, the State Council's censorship of films in the absence of an MPAA equivalent, a quota or allowance for imports, and so forth. It is evident that all of these barriers function as non-tariff barriers in practice. Consequently, many observers are taken aback by China's current stance in favor of free trade. Free trade is incompatible with Marxism. It can be likened to a fish being cut into pieces, with the aim of maximizing class divisions and global exports of invading capital. This results in the exploitation of society without the general harmonious development of the domestic economy, as evidenced by the case of Hong Kong. This free trade dogma has been identified as a matter of national security for any country or society, as has been previously stated by President Donald Trump. In this particular instance, the United States is the pertinent case in question.


On Sunday evening, President Donald Trump disseminated a statement via his social media platform, Truth Social, asserting that the film industry in America is undergoing a rapid decline.

According to the statement issued by President Trump, he has instructed the introduction of a 100% duty on the distribution of films shot outside the United States. He has characterized this action as a response to the alleged "poaching" of American studios by foreign entities, which he perceives as a "threat to national security."


The film industry in America is undergoing a precipitous decline. In the contemporary cinematic landscape, foreign countries are offering a variety of incentives to attract filmmakers and studios away from the United States. Numerous regions of the United States, including Hollywood, are currently experiencing financial distress. These efforts represent a coordinated initiative by other states, thereby posing a threat to national security. Moreover, these actions can be regarded as a form of messaging and propaganda. Consequently, the Department of Commerce and the United States Trade Representative are hereby authorized to initiate the process of imposing a 100 per cent tariff on all foreign-produced films entering the country. The objective of this initiative is to support the reshoring of film production to the United States.


Back view of the Hollywood sign during golden hour, overlooking Los Angeles with a hazy sky. Rugged hills and urban spread below.
FILE PHOTO: Hollywood sign and cityscape © Envato 

In regard to Hong Kong and China, the aforementioned event provides several points for consideration.


(1)  The initial definition of the film industry proposed by Hong Kong ‘scholars’ is not accurate. The film industry must be classified not as a secondary industry, but rather as a service sector, which includes film production. This represents the theoretical error that is often made.


(2)  The United States has historically exercised restraint in implementing tariffs on services, a practice that contrasts with the precedent set by France and the European Union with regard to the film tariff. The primary financial resource for filmmakers is the Centre National du Cinéma (CNC), an organization that is funded through a tax on all films screened in France. This tax encompasses a broad spectrum of cinematic works, ranging from major Hollywood productions to independent films produced domestically. Therefore, it can be posited that the film tariffs implemented by President Donald Trump will bear a resemblance to the French film tax policy, which is designed to encourage domestic production.


(3)  It is evident that the imposition of film tariffs is intended to target China. The most significant film market on the planet is China. In the People's Republic of China, the domestic production sector accounted for 83.77% of the market revenue share in 2023. In contrast, the market share of domestic production in the United States has remained below 40% since 1995, exhibiting a consistent downward trend (domestic box office income constituted 60% of the total market income for domestic production). Conversely, the film industry's reliance on the international market, which constituted 30% of the box office in 1991, has been reversed and even doubled since 2016, with domestically produced films now relying 60% on the international market for their box office success. A notable disparity emerges when examining the reliance on international market box office income, with China (20%) demonstrating a significantly lower dependence compared to the US (60%) within the film industry. Consequently, it is not unreasonable to attempt to reverse this trend from the US perspective. It should be noted that the six primary film studios are Sony, Universal Pictures, Warner Brothers, Fox, Disney, and Paramount. Furthermore, California accounts for 60% of the domestic box office in the United States. This is the backdrop against which the governor recently expressed support for China, prior to Trump's declaration of film tariffs. Despite the substantial tariffs imposed by the Trump administration, California Governor Gavin Newsom hasreaffirmed the state's commitment to sustaining its trade relations with China.


(4)  Market reliance was employed as a political tool by external actors. From a creative and ideological standpoint, China wields significant influence over the production of Hollywood films and the nature of trade in this sector.


(5)  China's coproductions, which are classified as non-foreign films, have been experiencing a consistent decline not only in collaboration with the United States but also with Hong Kong. Coproductions are theorized to encourage investment, facilitate seamless entry into foreign markets, boost tourism, and foster cultural acceptance among audiences. For Hong Kong, the initiative of scheme coproduction commenced with the endorsement of CEPA in 2004 and attained its zenith in 2018 with Operation Red Sea. The highest recorded percentage of the total Mainland box office income was 5.99%. This percentage subsequently declined to 0.52% in 2023. A decline in the number of coproductions was observed from 17 to 8 from 2018 to 2023. This trend has been exacerbated since 2019 due to the successful transition of mainlanders from the challenges faced in their film industry in recent years, leading to a reduced reliance on the U.S. and Hong Kong. Therefore, the decline of coproduction is attributable to industrial advancements, rather than to political factors.


(6)  The designation "Hong Kong film" is ultimately unproductive. The true solution lies not in the meticulously crafted PR campaign of CJ Entertainment, which was firmly established on Parasite (2019) and draws its origins from the PR campaign of Crouching Tiger, Hidden Dragon (2000). This campaign was initially used to promote Tsai Ming-liang's films internationally, and it was subsequently refined in East Asia through major social movements, such as the Sunflower Student Movement (2014) and the Hong Kong protests from 2019 to 2021. The film promotion network is developed in a manner that is not readily apparent. It can be utilized in both commercial and political contexts during mass events. However, this network of orchestrated commercial mobilization, which includes the acquisition of nominations, awards, and accolades from luxury industries through conglomerate infiltration of target markets, is only applicable to a limited number of films, not a significant number. It is evident that the Hong Kong film industry has utilized a concentrated PR campaign since 2021, with the objective of achieving "box office miracles". The film industry's excessive reliance on a limited number of box office successes continues to contribute to the ongoing depression in the industry and Hong Kong as a whole. This is evidenced by the persistent closure of theaters and the predominance of an aging elite in the city, as evidenced by the absence of new talents following the success of the "charismas" who were between 60 and 80 years old and who are still playing roles that would typically be expected of individuals in their early twenties. Nevertheless, the crux of the issue lies beyond the realm of style, narrative, or technical intricacies. Film and art serve as the visual representations of a society's prevailing cultural and social norms, reflecting the perspectives and values of the ruling class. The ruling class employs artistic expression to construct its own imaginaries. The Hong Kong ruling class is comprised of individuals who are primarily motivated by avarice, engaged in speculation, and characterized by a lack of concern for the proletariat of Hong Kong. Therefore, the art is employed to create false impressions regarding the working and living conditions of the city's inhabitants. It is imperative to implement reforms at this level to ensure the preservation of Hong Kong's artistic traditions. Only through such comprehensive societal changes can we safeguard the continued existence and vibrancy of all artistic expressions in Hong Kong. A genuine solution necessitates the dissolution of the dogmatic dualism that characterizes Hong Kong films and the adoption of a more inclusive approach in coproductions, often referred to as "mainlanderizing." Hong Kong's localism, a mere remnant of the "Hong Kong" brand, represents a significant blind spot in the city's identity. The term "Hong Kong films" can be considered synonymous with "China films," as the two are increasingly indistinguishable. A viable solution for Hong Kong in this domain is the complete unification with mainland China, which would result in the dissolution of superfluous localist boundaries. In summary, the phenomenon of "mainlanderizing" coproductions does not constitute the underlying cause of the observed decline in Hong Kong films. Rather, it can be interpreted as a strategic initiative that seeks to facilitate the complete unification of Hong Kong with the Mainland, ultimately resulting in the dissolution of Hong Kong films into the broader category of Chinese films. Hong Kong films currently face challenges due to the repercussions of free trade policies, akin to those experienced by Taiwan. This has led to a decline in the competitiveness of Hong Kong films within the global market, with Hollywood films maintaining a dominant presence in the domestic box office sector, accounting for approximately 80% of the industry's revenue.


(7)  The most effective solution to the issues currently facing Hong Kong's film industry is the adoption of either a fully Americanized approach or a complete unification with mainland China. This approach, referred to as "China films," is a more effective solution than any localist strategy in addressing this critical issue.

 

  



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