TLDR:
- Netflix shares fell 4.63% in pre-market trading following Trump’s announcement of 100% tariffs on foreign films
- The drop ends Netflix’s 11-day winning streak, the longest in company history
- Trump called foreign films a “national security threat” and ordered immediate tariff implementation
- US entertainment sector employs 2.3 million people but has seen production decline 28% since 2021
- Alibaba (BABA) continues to show strength with strong cloud business growth and an “Overweight” rating
Netflix shares took a sharp dive in pre-market trading on Monday, falling 4.63% to $1,103.00 after US President Donald Trump surprised markets with a late-night announcement of steep tariffs on foreign-made films.
The streaming giant had been enjoying an unprecedented 11-day winning streak that pushed its stock to an all-time high of $1,156.49. This drop of $53.49 from Friday’s close abruptly ends that historic run.
Trump’s announcement came via Truth Social on Sunday night. He declared his intention to impose an immediate 100% tariff on films produced overseas.
In his post, the president labeled foreign films a “national security threat” and called for a return to domestic production. “WE WANT MOVIES MADE IN AMERICA, AGAIN!” he wrote.
The president has directed both the Commerce Department and US Trade Representative to begin implementing this controversial policy immediately.
Despite Monday’s setback, Netflix stock remains up 30.42% year-to-date. The company had been bolstered by stronger-than-expected first quarter earnings.
Both subscription and advertising revenues had been surging before this tariff news broke. Netflix had been one of the best-performing stocks in the early days of Trump’s second term.
Netflix $NFLX Update
Bearish divergence on the weekly chart
This suggest that the bullish momentum could be running out of steam
The last weekly divergence played out with a 22% pullback 📉 pic.twitter.com/xgf8reqcGy
— Trader Edge (@Pro_Trader_Edge) May 3, 2025
US Film Industry Challenges
The US entertainment sector has been struggling with production shifts overseas. According to the Motion Picture Association, the industry supports approximately 2.3 million American jobs as of 2023.
US-based film and TV production spending has dropped dramatically by 28% since 2021. Los Angeles specifically saw a 22% decline in filming activity during just the first quarter of this year.
Production companies have increasingly been drawn to countries like Canada, the UK, and Australia. These nations offer attractive tax incentives and lower production costs compared to the United States.
Trump’s tariff appears aimed at reversing this trend by making foreign production financially prohibitive for American companies like Netflix.
Market Context
The broader market had been showing strength before this news. The S&P 500 had posted its ninth consecutive day of gains on Friday, marking its longest winning streak since November 2004.
The Dow Jones Industrial Average also rose 1.4% on Friday to record its ninth straight winning day. The Nasdaq gained approximately 1.5% in that session.
These gains came after China signaled openness to trade talks and a better-than-expected US jobs report for April. The economy added 177,000 nonfarm payrolls, exceeding economists’ expectations of 138,000.
While Netflix faces headwinds from the new tariff policy, other stocks like Alibaba Group Holding Limited (BABA) continue to show promise. Barclays recently reiterated an “Overweight” rating on Alibaba with a $180 price target.
Analysts highlighted Alibaba’s rapidly growing cloud business, which generates approximately $20 billion in revenue and $2 billion in EBITA annually. As China’s largest AI infrastructure provider, Alibaba is well-positioned to benefit from the industry’s shift toward AI applications.
The streaming giant now faces difficult decisions about its production strategy as the administration moves forward with implementing the new tariff policy.
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