Box Office vs. Tariffs: Why Disney and Universal Films Still Play in China Despite Trade War
78min read The U.S.-China trade war has reached a fever pitch, with tariffs now exceeding 145% on both sides. Yet, Disney’s Lilo & Stitch and Universal’s Minecraft are still screening in Chinese theaters. How is this possible? The answer lies in a fragile equilibrium where Hollywood’s global box office clout collides with Beijing’s cultural sovereignty ambitions. Here’s why investors shouldn’t write off these films—or the companies behind them—just yet.
The Trade War’s Paradox: Tariffs vs. Box Office Demand
China’s film market remains the world’s second-largest, contributing nearly 40% of global box office revenue. Despite retaliatory tariffs and a pledge to “moderately reduce” U.S. film imports, Beijing still needs Hollywood blockbusters to fill theaters. The reason? Chinese studios haven’t yet matched the scale of American franchises like Jurassic World or Marvel’s Thunderbolts. Even as patriotic local hits like Ne Zha 2 dominate (grossing $2 billion in 2024), the demand for high-budget foreign fare persists.
This creates a lifeline for disney and Universal: China’s commercial infrastructure relies on U.S. films to drive crowds to multiplexes. As one analyst noted, “You can’t have shopping malls without blockbusters.”
Disney’s Playbook: Co-Productions and Controlled Releases
Disney’s strategy hinges on two pillars:
1. Co-productions with Chinese firms, which allow films to bypass strict import quotas. For example, Wolf Totem (2015)—a co-production with China’s Huaxia—was classified as a “Chinese film,” giving it automatic release rights.
2. Strategic timing of releases to align with holidays. Thunderbolts, scheduled for China’s Labour Day holiday in 2025, exemplifies this.
Despite a 75% drop in Hollywood’s China revenue since 2017, Disney’s films still command premium ticket prices. In 2024, Alien: Romulus earned $110 million in China—proof that even in a downturn, blockbusters can thrive.
Universal’s Wildcard: Franchises and Footholds
Universal faces steeper challenges. Its parent company, Comcast, is squarely in China’s crosshairs: it was one of 38 U.S. firms added to Beijing’s “unreliable entities list” in April 2025. Yet, Universal’s 2024 co-production Minecraft (with Legendary Entertainment) earned $20 million in its first week in China—highlighting the power of co-productions to bypass restrictions.
For 2025, Universal’s M3GAN 2.0 and Jurassic World: Rebirth are in limbo. Their fate depends on whether they secured approvals before April 10, when China’s new restrictions kicked in. Analysts note that films pre-approved in 2024 (like Minecraft) will likely still screen, but new releases face scrutiny.
The Investment Calculus: Risks and Opportunities
Risks:
- Revenue volatility: A full ban on U.S. films could cost Disney $1 billion+ annually in China.
- Geopolitical escalation: Tariffs could rise further, squeezing margins (Disney’s China revenue share is 25%, vs. 50%+ elsewhere).
Opportunities:
- Co-production partnerships: Studios that align with Chinese firms (e.g., Legendary) gain access to quotas and subsidies.
- Market diversification: Universal’s Minecraft success shows how localized content can thrive.
Conclusion: Navigate the Minefield, but Don’t Abandon China
Investors must balance two truths:
1. The trade war isn’t ending soon. With tariffs at 145%, neither side has incentive to compromise.
2. China’s film market isn’t going anywhere. Even with quotas, U.S. films still dominate in action, sci-fi, and family genres—genres where local studios lag.
The winners will be companies that:
- Double down on co-productions (think Ne Zha 2’s success).
- Diversify releases to holidays and local partnerships.
For now, Disney and Universal remain indispensable to China’s theater economy. Investors who write them off risk missing out on $40 billion+ in annual global box office—a market where Hollywood’s storytelling still holds sway.
Final caveat: Monitor trade talks closely. A sudden tariff rollback could send stocks soaring—but don’t bet on it. The trade war is here to stay.
