What has already been a rough year at the box office (make that a rough handful of years) is about to get even more rough. As we recently reported, U.S. President Donald Trump’s tariffs led China to consider a pause on allowing any Hollywood films to play in the country. Recently, Trump put a 90-day hold on his tariffs throughout much of the world, with the exclusion of China. Instead, he raised the tariffs once again on the country, escalating the trade war between two of the world’s biggest economies. Now, that trade war is officially coming for Hollywood.
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According to a new report from Bloomberg, Chinese regulators are officially going to reduce the number of U.S. films allowed in the country in response to the tariffs imposed by Trump. Just how severe the reduction will be remains to be seen, but China has already been favoring homegrown titles of late, including this year’s “Ne Zha 2” (which made more than $2 billion from Chinese ticket sales alone). The China Film Administration had this to say about it in a statement:
“The wrong action of the US government to abuse tariffs on China will inevitably further reduce the domestic audience’s favorability towards American films. We will follow the market rules, respect the audience’s choice, and moderately reduce the number of American films imported. China is the world’s second-largest film market. We have always adhered to a high level of opening up to the outside world and will introduce more excellent films from the world to meet market demand.”
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While Hollywood movies have been making far less in China since the pandemic, it remains the second-biggest moviegoing market in the world. Plus, certain movies still perform very well there. “Avatar: The Way of Water” made $2.3 billion globally, with a whopping $246 million of that total coming from China. With Disney due to release James Cameron’s “Avatar: Fire and Ash” in December, this newfound policy’s potential impact is coming into focus.
The box office will suffer in the short term, but what about the long term impact?
In total, U.S. imports made around $950 million in China in the 2023 calendar year. That is but a small fraction of the country’s overall market now, but Hollywood needs every dollar it can get. “The Way of Water” still would have been a $2 billion movie even without China. But something like 2021’s “Godzilla vs. Kong” made $188.7 million of its $467.8 million global total in China. That movie was straight-up saved by those ticket sales.
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Granted, in most cases, theaters keep around half of the money from the box office, whereas studios only see about 25% of that money from China (due to international taxes and other factors). Nevertheless, 25% of $188 million is still a lot of money, while 25% of $950 million is a whole lot of money. That’s the larger point here. A lot of money studios could really use right now is going to evaporate.
The other issue, as the CFA pointed out, is that Chinese moviegoers may not be as inclined to support American movies right now, given the ongoing trade war. So, even if a movie like “Mission: Impossible — The Final Reckoning” can secure a theatrical release in China, it may be even tougher sledding than it has been of late.
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For years now, mind you, Hollywood hasn’t been able to depend on China’s box office like it used to. That’s to say, major studios couldn’t depend on robust grosses from the country even before this mess. But there’s a big difference between not being able to depend on it and wiping that money off the board entirely. That’s what we’re looking at now, and at a time when the box office is more volatile than it’s ever been, the industry at large can ill-afford such setbacks. And yet, here we are. One can only hope that this is merely a short term issue and that there aren’t long term ramifications for the relationship between Hollywood and China, though that does seem like a distinct possibility.
