Hollywood recently got the Trump tariff treatment. On Sunday, the president announced a 100 percent tariff on movies made outside America. Filmmakers said the move would hurt U.S. filmmaking. Shares for Netflix and other entertainment companies fell. The next day, the White House said no tariff would take effect.

We’ve seen this before for other sectors of the economy. But why would President Trump think Hollywood could benefit from more protectionism? Today’s newsletter looks at the headwinds the industry faces.

Hollywood’s problems

When Trump talks tariffs, he typically speaks about manufacturing. He invokes American industries that have fallen from grace — steel, coal, cars — and the physical goods that they once made for the world. He complains that the United States imports more goods than it exports, leading to a trade deficit.

Hollywood doesn’t fit that description. It remains the world’s dominant moviemaking industry. American film exports are three times as high as imports, according to the Motion Picture Association. Movies are also a service; the product is entertainment, not a physical good. And unlike with goods, the United States has a nearly $300 billion trade surplus with services.

Still, Hollywood has problems. For one, fewer movies are made in Los Angeles nowadays. Filming has moved to other states and, increasingly, overseas. Other countries offer cheaper labor and tax credits for filmmakers. This has erased jobs once held by Americans. “WE WANT MOVIES MADE IN AMERICA, AGAIN!” Trump posted online.