Hollywood’s long-standing relationship with Canada, a key production hub for major studios and streamers, is facing potential turbulence as President Donald Trump’s proposed 25% tariffs on Canadian and Mexican exports to the U.S. raise concerns about the industry’s future north of the border. While the threat of a trade war could jeopardize access to lucrative Canadian tax credits and production infrastructure, some analysts believe the resulting economic shifts could make shooting in Canada even more cost-effective for U.S. studios.

Hollywood’s Ties to Canada Under Fire

For decades, Canada has served as Hollywood’s go-to location for cost-effective, high-quality productions. With well-trained crews, world-class visual effects studios, and competitive tax incentives, cities like Vancouver, Toronto, and Montreal have been integral to American film and television production. However, Trump’s aggressive trade policies could disrupt that symbiotic relationship.

The biggest fear among industry insiders is retaliation from the Canadian government. If tariffs on Canadian goods are implemented, Prime Minister Justin Trudeau has vowed a “forceful and immediate response,” which could include rescinding tax credits that have made Canada such an attractive production hub. There’s even speculation that Canada could limit access to its soundstages for U.S. productions, a move that would significantly disrupt the industry.

Could Tariffs Make Canada More Appealing?

Paradoxically, Trump’s trade measures could also make shooting in Canada more attractive. The tariff threat has already caused the Canadian dollar to drop to just over 70 cents against the U.S. dollar, its lowest level since 2020. A further dip would create even more savings for American studios looking to film abroad.

“This kind of FX [foreign exchange] fluctuation consistently benefits Canadian service production. It also enhances the value that comes out of international co-productions,” said Noah Segal, co-president of Toronto-based Elevation Pictures.

For U.S. studios navigating tighter post-strike budgets, a weaker Canadian dollar could prove irresistible. “If the loonie falls below 70 cents, it’s going to be too good for the Americans to resist,” said Paul Bronfman, chairman of Comweb Corp. and a senior adviser to Pinewood Toronto Studios.

The California Exodus and Newsom’s Fight to Keep Productions Local

While Trump’s tariffs could ultimately drive more Hollywood productions to Canada, California Governor Gavin Newsom has been working to keep film and TV projects within the state. In late 2024, Newsom announced plans to double California’s production tax credit program to $750 million in an effort to stem the exodus of productions seeking cheaper options elsewhere.

Despite Newsom’s efforts, many Hollywood players remain drawn to Canada’s cost advantages. “I don’t know how motivated Trump is to make sure that all the work stays in Hollywood. It’s not the first industry he’s going to double over to help,” said Jennifer Twiner McCarron, CEO and Chair of Thunderbird Entertainment.

A Complicated Future for Hollywood and Canada

The potential impact of Trump’s tariffs on Hollywood extends beyond just location costs. Key sectors like visual effects could also be affected. Canadian VFX studios, already competitive due to lower costs, could see an influx of American business as studios look to offset higher production expenses. However, these studios may also face increased costs for purchasing American software and hardware.

Independent filmmakers in Canada could also feel the squeeze. While a weaker Canadian dollar would attract more U.S. productions, it could also create intense competition for local resources like soundstages, rental equipment, and crew members. “If I’m making a $10 million movie, I’m renting gear and hiring crew against Netflix’s tentpole movie,” noted Nicholas Tabbarok, an indie producer with Toronto-based Darius Films.

Meanwhile, Canadian industry leaders remain optimistic about Hollywood’s continued reliance on their facilities. “Toronto’s unique combination of stable incentives, world-class infrastructure, and unmatched crew talent—combined with its commitment to crew and performer diversity—establishes it as a premier destination for film and television production,” said Eoin Egan, co-managing partner and COO at Cinespace Studios.

Hollywood’s Biggest Concern: Consumer Spending

Beyond production logistics, one of Hollywood’s most pressing concerns is how Trump’s tariffs could impact consumer spending. If tariffs drive up the price of everyday goods, households may tighten their entertainment budgets. After years of disruptions from the COVID-19 pandemic and dual labor strikes, the film industry is still recovering, and a decline in box office revenue due to reduced discretionary spending could be a significant blow.

While Hollywood will undoubtedly adapt to whatever consequences arise from these tariffs, its reliance on both affordable production and a healthy consumer base remains crucial. As major studios prepare for their 2025 releases, all eyes will be on the evolving trade policies and their potential ripple effects across the industry.

For now, the U.S.-Canada production relationship hangs in the balance—caught between economic shifts that could either disrupt or reinforce Hollywood’s reliance on its northern neighbor.