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(Bloomberg) -- China announced it would curb imports of Hollywood films, opening a new front in its trade war with the US hours after President Donald Trump’s record tariffs took effect.
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Authorities vowed on Thursday to “moderately reduce” the number of US movies allowed into the world’s second-largest economy — a step floated earlier this week as a possible retaliation measure by two influential Chinese bloggers.
“The wrong action of the US government to abuse tariffs on China will inevitably further reduce the domestic audience’s favorability toward American films,” the China Film Administration said in a statement announcing the move.
Shares of entertainment companies fell Thursday morning in New York, with Walt Disney Co. down 5.6% while Paramount Global slid 1.1% and Warner Bros. Discovery Inc. tumbled 11% as part of a broader pullback in markets.
While President Xi Jinping’s government held off from an outright ban of US films, the move signaled Beijing could now target American services in the trade war. That opens up a new menu of retaliation options: The US runs a service trade surplus with China, mainly in travel, intellectual property royalties and transportation.
A state-media affiliated account, which has been used to signal Beijing’s stance on trade issues, this week cited an expert saying China doesn’t rule out targeting services.
“China has plenty of tools for retaliation,” the article on Yuyuantantian’s social media page said. “Of course, China will widely listen to opinion and minimize the negative impact on the domestic economy while trying to maximize the effect of countermeasures.”
Tensions between Beijing and Washington have spiraled beyond tit-for-tat tariff exchanges in recent days to also impact people ties. Chinese officials Wednesday cautioned citizens against traveling to the US, and warned students of security risks related to studying in “certain US states” — a departure from Xi’s push to improve people exchanges.
Smaller Market
China, the world’s second-largest market for films, was long a crucial market for US studios. After the first US picture was approved for release in the Asian nation in 1994, studios developed a dependence on that market for growth as the box office peaked in the West and streaming services stole audiences. But in recent years, Chinese regulators have curbed access to their theaters, suggesting American titles don’t align with Communist Party values.