Trump Tariffs Impact on Hollywood: Not Much ‘Direct Harm’ — but a Resulting Recession Would Be ‘One-Two Punch’ for the Entire Sector
Todd Spangler
5 min read
The dramatic tariffs President Trump announced Wednesday won’t directly impose higher costs on most media and entertainment companies. However, the knock-on effects — namely, depressed U.S. consumer spending and a pullback in ad budgets — would clearly cut into Hollywood’s profits, according to analysts.
Trump’s “reciprocal” tariffs “won’t cause much direct harm” to media and entertainment companies, Morningstar senior equity analyst Matthew Dolgin wrote in an April 3 research note. Other than the likes of Apple and Roku, for which hardware comprises a sizable portion of revenue, most companies in the sector “don’t rely much or at all on selling goods. However, most do rely directly on consumer spending, so economic weakness that results from the tariffs could impede business.”
Companies hit by higher tariffs are not going to absorb those costs — which would mean higher prices for consumers. And among consumers, “one of the first places they are going to spend less is in media and entertainment,” said CJ Banagh, principal in PwC’s telecom, media and technology practice.
An economic downturn also would result in lower advertising spending, Banagh said, and ad dollars “fuel a large portion of the media and entertainment industry.” That could mean a “one-two punch” for Hollywood players with drops in consumer and ad spending, she said. In such an environment, the “imperatives are simple,” Banagh said. Her advice: “Absolutely don’t dial back on quality of content and the consumer experience” while at the same time be “very thoughtful” about areas to buckle down and operate more efficiently.
“What we’ve seen from or research is companies that don’t cut marketing in a downturn do much better than those that do,” said Banagh.
There could be other ripple effects. As European countries grapple with the economic effects of the tariffs and the implications of the U.S.’s new approach to international conflicts, “the sentiment surrounding American movies and media may shift among the European public,” said Maggie Switek, an economist and senior director of research at the Milken Institute, a nonpartisan think tank. “It is too soon to tell what the long-term effects of these sentiment shifts may be, but it will be important to track public opinion data to better understand what may be in stock for Hollywood’s future.”
Even before Trump’s “Liberation Day” tariff announcement, U.S. consumer confidence was already on the skids. The Conference Board’s Consumer Confidence Index fell by 7.2 points in March, marking its fourth consecutive month of decline. Trump’s announcement on tariffs has “injected another round of turbulence into the markets, which is likely to be reflected in consumer sentiment,” Switek said.
Some of the biggest U.S. media and entertainment stocks that fell as much as (or more than) the broader market were Disney (down 9.3% for the day Thursday), Warner Bros. Discovery (-13.3%), Live Nation Entertainment (-6.4%), and Roku (-15.6%). That came amid a notable decline in indexes like the S&P 500, which declined 4.84% for the day, and the Nasdaq, down 5.97%.
Disney’s theme parks and experiences generate most of its profit, and “a recession would likely depress tourism and reduce attendance at Disney’s parks,” Morningstar’s Dolgin wrote. In addition, “Disney is at risk of less international tourism to the U.S., particularly from Canada, due to chilled foreign relations.” He said Live Nation has similar exposure, “as concert attendance is a luxury that consumers could pull back from if needed.” But while Disney would see its business cool in a recession, its “improving streaming business makes up for potential [theme parks] weakness,” Dolgin added.
Regarding the drop in WBD’s stock, Dolgin attributed that largely to its debt burden, “as many stocks of highly leveraged firms are weak, perhaps on fears of tightening credit.”
Among M&E stocks, Roku does rely on international manufacturing from China, Southeast Asia, Mexico and Brazil for the TVs and devices it sells. But its devices business is a loss-leader — all of its profits are generated from ad sales and revenue-sharing agreements, “which will be unaffected by tariffs directly,” according to Dolgin. That said, Roku’s business will get hurt if advertising spending declines, “so the stock does not look attractive.”
Consumer electronics companies will be directly affected by Trump’s punishing tariffs on China and other Asian countries. The Consumer Technology Association, the trade group that says it represents companies supporting more than 18 million U.S. jobs, issued a blistering rebuke of Trump’s plan.
“President Trump’s sweeping global and reciprocal tariffs are massive tax hikes on Americans that will drive inflation, kill jobs on Main Street, and may cause a recession for the U.S. economy,” CTA CEO and vice chair Gary Shapiro said in a statement. “These tariffs will raise consumer prices and will force our trade partners to retaliate. Americans will become poorer because of these tariffs.”
Shapiro continued, “This will not be a golden age — but a return to the global economic catastrophe of the Smoot-Hawley tariffs of the 1930s that will disproportionately hurt low-income and hardworking Americans. Make no mistake: American consumers, families, and workers will feel real pain, and elected policymakers in Washington will be held accountable by voters.”
