Leaders of visual effects studios, here’s what you need to know about proposed legislation to reshore film production to the USA, and what you should do about it.
Make Filming in America Great Again
Three forces are at work to reshore filming in the USA, a stick and two carrots:
The stick: The Trump administration’s tariff proposal
The stated goal is to bring jobs back to America and reshore the domestic film industry. If enacted, President Trump’s proposal would slap a 100% tariff on any movie or content produced outside the US and imported for US distribution. The tariff proposal covers traditional movies and may also include episodic content, maybe even high-end YouTube productions. The details are still murky, but the message is clear: making films outside the US could become twice as expensive.
Carrot #1: State tax credits
Tax credits are a powerful incentive to determine where films get shot. In May 2025, New York state passed a budget with $800Mn of subsidies to increase physical film and TV production in the state. Not to be outdone, in June 2025, California approved a new Film & TV tax credit bill to encourage physical production in the state. The bill expands the definition of a qualified motion picture to series with episodes lasting at least 20 minutes, animation films, series, and shorts. There are efforts to increase funding from $330Mn to $750Mn.
Carrot #2: Federal tax credits
The Motion Picture Association and Hollywood unions urged the Trump administration, in a May 2025 letter, to renew three sections of the U.S. tax code to bring film and TV production back to the US: Section 181, which allows productions to write-off the first $15Mn in spend on domestic shoots; Section 199, which reduces corporate tax rates on filmmaking; Section 461, which allows productions to carry back their net operating losses to reduce their tax burden
With the Trump’s administration’s overseas tariffs penalizing content produced overseas, and proposed state and federal tax credits working to make content filmed in the USA more attractive.
A repatriation of filming to the USA appears to be a more real prospect than it has in a long time.
What Does This Mean for VFX Studios?
1. Expect financial challenges to maintain a viable international footprint
US VFX studios followed film production to overseas locations, because physical proximity to filming matters, operationally. Many US VFX studios have an international footprint, in Vancouver, Toronto and London to name a few. Expect that where VFX work gets done will continue to follow where films are shot. If reshoring happens, it will affect the financial health of VFX studios in international locations that are reliant on US content producers.
2. Expect pressure on US VFX artist wages
The US VFX workforce has shrunk and specialized. If VFX work is reshored along with film production, there aren’t enough skilled artists to handle the load. So, expect pressure on salaries.
3. Expect no relief for VFX budgets
Major US content producers like Disney, Warner Bros and Netflix represent almost half of global content spending. They have been reining in their spend on content to improve the profitability of their operations. Nothing in the proposed legislation appears likely to open the purse strings of the content majors. VFX studios should continue to expect fewer projects and more scrutiny on every dollar spent on VFX.
So, what should VFX studios do?
We envisaged three scenarios. The jury is still out on which one will prevail.
Scenario 1: Optimistic – TACO – Tariffs Are Not Enacted
TACO, short for “Trump Always Chickens Out” – was coined by a Financial Times columnist to describe the Trump administration’s on-again, off-again tariff policies. In this scenario, there’s no follow-through on applying tariffs to overseas made content. In other words, business as usual.
The winning strategy is to keep calm, carry on and ignore the noise, which means:
Strengthen ties with clients to show that you’re a stable, reliable partner no matter what happens.
Follow the money: Continue to follow your clients overseas. Build an international footprint in tax incentivized locations vying for market share of film production, where your clients want to film.
Plan for reshoring to be ready to handle more work in the USA coming from tax credits. Build out the local artist talent pool that can be hired on short notice, before your competitors do.
Invest in AI, remote collaboration, and cloud workflows to drive down COGS and increase productivity
Scenario 2: Pessimistic – Tariffs Are Enacted and Applied
In this scenario, the Trump administration follows through with tariffs on overseas production.
The winning strategy is to plan for an accelerated repatriation of production back to the US. This means:
Grow in the USA: With more production expected in the USA, you will need more local VFX talent. You can hire in a pool of talent that has become more shallow in the past years, or you can move your overseas talent to the USA.
Invest in AI and automation to increase productivity of domestic VFX artists and offset higher labor costs.
Defend your international footprint: Expect your international footprint to feel financial pressure with the tariffs. Which means you’re faced with a fork in the road: Play defense or play offense.
Defense: The knee-jerk, defensive option is to scale back your international footprint and cut costs. This preserves cash but makes it hard for your VFX studio to follow your customers back overseas in the future.
Offense: The offensive option is to diversity your customer base. Go after international content producers, to reduce reliance on US studio projects. Explore expanding into VFX for gaming and advertising. Cracking the gaming industry is a huge challenge, as gaming studios have a lot of CGI talent inhouse to draw upon. But CGI budgets in gaming dwarf those in movies, which makes the play attractive for those with great CGI talent. Advertising is comparatively easier, but it’s a lot of small contracts, so can be unattractive, especially for VFX salespeople used to signing larger budgets.
Share the pain: The Trump proposal’s wording does not explicitly include VFX work in the scope of the tariffs. But VFX is a cost to the film, so it is not unreasonable to expect that VFX costs will be in the scope of the tariffs. In the event, work with clients, so that the burden of the tariffs is shared fairly.
Scenario 3: Worst Case – Tariffs Are Enacted but Not Applied
In this scenario, the Trump administration follows through with tariffs, but implementation get bogged down. This could be due to definitional challenges, e.g., what is taxable, or to practical challenges, e.g. how and where to tax a services.
Operationally, this is the most complex and most costly for VFX studios, who need to stay agile and preserve optionality. In practice, it’s a version of Scenario 2, where in addition VFX studios need to:
Maintain global operations but prepare to pivot quickly to domestic production if enforcement begins.
Develop both US and international production plans for each project.
Key Takeaways
1. Stay close to clients: The threat of tariffs and the increased domestic tax credits is causing content producers to rethink their plans. Stay close to them and keep communication channels open, to understand how their plans unfold. Be ready to adapt.
2. Rethink talent and technology: All scenarios suggest a strong and flexible workforce, along with technology to drive productivity, are no regrets moves
3. Build financial resilience: Ensure you have the funds to weather the uncertainty. Whether by reducing your cost structure, improving free cash flow or setting up lines of credit or a capital raise, make sure you’re not facing a cash crunch in the coming months.
4. Band together: This is a problem that is vexing all VFX studios. There is merit in banding together to fund lobbying initiatives.
Conclusion
The reshoring efforts should be a wake-up call for every VFX studio to stress their strategy and operations. As with all external shocks, some studios will come out ahead, some will go backwards, some will go under.
Reach out if you want to talk to our Media and Foreign Services SMEs keeping tabs on how the situation is unfolding, or if you want a sounding board to think through your options
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