Streaming Giants Face New Headwinds as Trade Tensions Escalate

The entertainment industry is bracing for fresh turbulence as President Donald Trump’s proposed 100% tariff on foreign-made films threatens to upend the business models of streaming giants Netflix and Disney. The policy, part of a broader strategy to revive domestic film production, has already sent shares of both companies into a tailspin, underscoring how geopolitical risks are increasingly shaping investment outcomes in the digital age.

The tariff, which would apply to films produced outside the U.S., is designed to incentivize studios to shift production to American soil. For Netflix and Disney, this poses a uniquely acute problem. Both companies rely heavily on international content to fuel their global streaming platforms. Netflix, which derives nearly 60% of its revenue from outside the U.S., has built its brand on a diverse catalog of international hits—from South Korea’s Squid Game to India’s Sacred Games. Disney, meanwhile, sources over 30% of its content from overseas, including Marvel and Star Wars franchises that rely on global talent pools.

The immediate market reaction has been stark. Netflix’s shares fell 8% in the days following the tariff announcement, while Disney’s stock dropped 5%, erasing billions in combined market capitalization. Analysts note the sell-off reflects not just the tariff’s direct costs but also fears of a broader trade war. If other countries retaliate with tariffs on U.S. content—a move already hinted at by the European Union—the ripple effects could be severe.

The economic stakes are immense. A 100% tariff on foreign films would effectively double the cost of international content for U.S. platforms. For Netflix, which spent $17 billion on content last year, the hit could force tough choices: raise subscription prices, reduce content budgets, or absorb lower margins. Historically, Netflix has avoided price hikes in mature markets to retain subscribers, but with growth already slowing—its U.S. subscriber base grew by just 1% in Q2—this option may become less viable.

Disney faces a different calculus. Its direct-to-consumer division, which includes Disney+, Hulu, and ESPN+, has seen robust growth but remains unprofitable. A tariff could exacerbate margin pressures, squeezing a segment that already burns through $2 billion annually. Disney’s ownership of 21st Century Fox, with its global studios, might offer some insulation, but its international film library—from Marvel’s $1 billion blockbusters to Star Wars spin-offs—remains a key revenue driver.

The political landscape adds further uncertainty. While the tariff proposal has bipartisan support in Congress, its implementation hinges on trade negotiations with key partners like Canada and Mexico, which account for a significant portion of foreign film imports. A delay or dilution of the policy could provide temporary relief, but the precedent of using tariffs as a cultural policy tool could reshape the industry’s global strategy.

Investors should also consider the long game. If tariffs become permanent, companies may pivot to U.S.-produced content, though this carries its own risks. Relocating production could spark backlash in markets like Europe and Asia, where local content is culturally vital. Meanwhile, smaller studios and emerging markets—already struggling against Hollywood’s dominance—might find it harder to compete.

The broader lesson is clear: in an era of fragmented global trade, entertainment companies can no longer treat content as a borderless commodity. For Netflix and Disney, the tariff isn’t just a cost issue—it’s a strategic reckoning. Investors would be wise to monitor not just quarterly earnings but also the shifting tides of geopolitical policy. In the end, the industry’s ability to adapt will determine whether these stocks recover or succumb to the storm.

Conclusion
The proposed 100% tariff on foreign-made films marks a turning point for streaming giants, exposing vulnerabilities in their reliance on global content. With Netflix’s stock down 22% year-to-date and Disney’s down 15%, the market has already priced in near-term pain. However, the longer-term implications depend on whether companies can navigate trade tensions without sacrificing the diversity that defines their appeal. For now, the trade war’s collateral damage suggests investors should brace for continued volatility—a reality that may reshape the entertainment industry’s global footprint for years to come.