President Trump used social media to repeat his threat to impose a 100% tariff on films produced outside the United States and imported into the U.S. market.
The proposal, still lacking details, has put filmmakers on alert, and renewed the debate over how best to support domestic filmmaking.
The question now is whether tariffs or tax incentives represent the smarter path forward. So let’s have a look:
The tariff model
A 100% tariff would effectively double the cost of bringing foreign-made films into the U.S. market. Supporters claim such a move would discourage filmmakers from outsourcing production abroad, shifting projects back to U.S. locations, crews, vendors, and facilities. States like Illinois, Georgia, New Mexico, and New Jersey, which already have the infrastructure and offer tax credit incentives, could see increased demand if foreign shoots became financially impractical.
However, the potential drawbacks are significant. Films are not standard goods; they are intellectual property and international services, making tariffs complex to enforce. U.S. film productions often rely on global financing, collaboration with overseas visual effects houses, animation, and filming locations abroad. Applying a tariff in this context could raise production budgets sharply or halt projects entirely. Distributors warn that smaller foreign films could disappear from U.S. theaters, narrowing the cultural range available to audiences. Analysts also caution that other countries would likely retaliate by imposing tariffs on U.S. made films, limiting access to overseas markets where U.S. studios and independent productions earn much of their box office revenue.
Where does the tariff money go?
If tariffs were collected, U.S. filmmakers would not directly benefit. By law, tariff revenue goes into the U.S. Treasury’s general fund, where it can be spent on any federal priority. None of it is directed toward filmmaking, production subsidies, or cultural programs.
This creates a double bind for producers. If a U.S. filmmaker shoots overseas and brings the finished project back home, they would face a 100% tariff at import. If the same filmmaker shoots their film in the U.S., they risk retaliation overseas if foreign governments impose their own tariffs on U.S. films entering their markets. In both cases, filmmakers are left with higher costs and reduced revenues. For an industry that often earns the majority of its box office overseas, where’s the win in that?
The tax credit incentive model
Federal tax incentives offer a different approach. Rather than penalizing projects made abroad, they would reward productions made entirely in the United States. Modeled on state-level programs, incentives could include credits, rebates, or deductions tied to domestic spending, crew hiring, and use of U.S. facilities. These incentives apply broadly, covering film, television, and commercial production alike.
New Jersey, currently the busiest filming state in the country, shows what a well-executed program can deliver. Its Film & Digital Media Tax Credit provides transferable credits of 30–35% on qualified expenses, with bonus tiers in certain municipalities. Expanded in 2024 and extended through 2049, the program has fueled record spending: over $590 million in 2023, with projections exceeding $600 million in 2025. Netflix has committed to a $900 million production hub at Fort Monmouth, while the state’s “Film Ready Communities” initiative has prepared dozens of towns to host productions efficiently.
Illinois is moving up in the ranks as a proven strong player, with a revised tax incentive bill awaiting a vote in October that will strengthen its position further. Even under its current program, the state continues to attract television series and feature films, supporting union jobs and ancillary businesses. Unlike New Jersey, the Illinois tax credit has no annual or project cap, giving producers more predictability and attracting larger budget films. Chicago anchors the industry with seasoned crews and infrastructure, while the rest of the state offers unmatched versatility: historic towns, farmland, forests, lakes and river landscapes that provide authentic backdrops. Flyover Studios, a new state-of-the-art facility in central Illinois, ensures filmmakers have both the locations and production resources they need without leaving the state. The revised incentive program would position Illinois to compete even more directly with states like New Jersey while increasing its role as a national production hub.
Georgia has become one of the busiest production hubs in the world, generating billions in annual spending, while New Mexico has secured permanent facilities from Netflix and NBCUniversal, ensuring consistent production activity.
By scaling these models nationally, a federal incentive program could multiply those benefits: creating jobs, strengthening U.S. film infrastructure, and keeping productions competitive in a global market. For filmmakers, incentives offer predictability in budgeting, making domestic shoots more attractive without the uncertainty of trade disputes or retaliation from foreign governments.
The Canadian Advantage
For many years, Canada has been the Chicago film industry’s biggest competitor, largely because of its federal tax incentives. Since 1995, Ottawa has offered refundable credits that give it a consistent edge over the U.S.
The Canadian Film or Video Production Tax Credit provides a 25% rebate for certified Canadian content, while the Production Services Tax Credit, introduced in 1997, offers 16% for both Canadian and foreign companies filming in Canada. When stacked with provincial credits in places like Ontario, Quebec, and British Columbia, productions can recover 30–40% or more of labor costs.
That advantage has made it nearly impossible for U.S. states to compete dollar for dollar. Stories set in Chicago are often filmed in Toronto because the savings are too significant for producers to ignore. Without a federal incentive to match, even strong state programs in Illinois, New Jersey, or Georgia remain at a disadvantage.
Canada’s model shows how federal incentives coexist with regional ones to build a powerful, globally competitive framework. For U.S. policymakers, it underscores the point: tariffs don’t win productions — incentives do.
Summing it up
Both policies aim to increase U.S. film production, but they take very different paths. Tariffs raise costs on international participation, with the risk of retaliation and reduced film output. Incentives use financial rewards to encourage U.S. based production, building on a model that states have already proven can create jobs and attract investment.
For U.S. filmmakers, the contrast is clear: tariffs create obstacles, while incentives open doors. If the goal is to grow jobs, infrastructure, and global competitiveness, the evidence suggests that investment through incentives, not trade barriers, is the path forward.
Why not do both?
The idea of combining tariffs with tax incentives comes up often. Technically, the government could do both, collecting revenue through tariffs while offering credits to encourage U.S. production.
But in practice, it would be like hitting the brakes and the gas at the same time. Tariffs raise costs and risk retaliation overseas, while incentives are designed to lower costs and attract investment. Retaliation tariffs abroad would still cut into overseas box office, where U.S. films earn most of their revenue. And the combination would be economically inefficient, raising costs with one hand while trying to reduce them with the other. Together, they create uncertainty, which is the last thing filmmakers need when planning productions.
Industry analysts say incentives alone deliver clearer benefits.
Film incentives in action: Illinois at a glance
Economic Growth
The program generated $4.5 billion in economic activity between 2017–2024, with an estimated $6.81 return for every dollar in credits issued.
Tax Revenue Expansion
Productions boost income, payroll, and sales tax revenues through spending on wages, hotels, catering, rentals, and local services.
Job Creation & Training
In 2024 alone, Illinois productions supported 18,000+ hires and $351 million in wages. The law requires collaboration with universities and labor groups to train the next generation of crew and talent.
Infrastructure Investment
A consistent incentive environment attracts private investment, including new facilities like Illinois’ newest, Flyover Studios in central Illinois, creating long-term economic anchors beyond individual projects.
Competitive Edge
If the Illinois Film Production Tax Credit Incentive Program is updated this fall, Illinois will be better positioned against New Jersey and Georgia, ensuring that productions — and their tax revenues — continue to flow into the state.
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