For investors in Netflix Inc (NASDAQ:NFLX, ETR:NFC), the message is to monitor the risk but avoid panic.
Donald Trump’s proposal to impose tariffs on foreign-produced films may grab headlines, but it is unlikely to disrupt the core economics of the streaming giant in the near term.
According to analysts at Wedbush, Netflix is relatively insulated for now.
Around 75% of its content is produced outside the United States, including much of its English-language programming shot in Canada and the United Kingdom.
Small beer
Only a portion of that is newly commissioned. Of the company’s $18 billion annual content budget, Wedbush estimates that just $2 to $3 billion is newly produced foreign content, which could fall within the scope of any potential tariff.
The bigger question is what form these tariffs would take. If they apply narrowly, for example, only to theatrical releases or physical goods like DVDs, the impact on Netflix would be negligible.
A broader policy that attempts to tax streamed content would be far harder to enforce and could create legal and logistical problems across the industry. As Wedbush puts it, enforcing tariffs on intellectual property is nearly impossible.
The policy uncertainty leaves room for interpretation, which is what makes it risky for traditional studios.
Broader pain
Companies such as Walt Disney Co (NYSE:DIS, ETR:WDP), Warner Bros Discovery Inc (NASDAQ:WBD, ETR:J5A), Paramount Global (NASDAQ:PARA) and Sony Group Corp (NYSE:SONY) often rely on overseas shoots to lower costs or access specific locations.
They may now face pressure to shift more production back to the United States or lobby for exemptions on location-based filming. Cities that previously lost productions to cheaper international alternatives could introduce tax incentives to draw them back.
There is also the possibility of geopolitical blowback. Other countries could respond with tariffs or restrictions on United States content, especially if the proposal is viewed as protectionist.
With Congress holding the constitutional authority over trade, there is no guarantee that the plan will move forward in its current form.
Value-for-money?
Still, for Netflix, Wedbush is sticking to its positive outlook. The firm reiterated its 'outperform' rating and maintains a 12-month price target of $1,200.
Analysts expect price increases and the expansion of the ad-supported tier to drive revenue growth in 2025, with improving margins contributing to stronger free cash flow beyond that.
The tariff noise may unsettle the market in the short term, but Netflix’s long-term investment case remains unchanged.