Budapest (AFP) - A prop axe was brought in as crew members set the scene for a horror movie being filmed in Budapest’s former psychiatric institute, one of numerous Hollywood productions under way in the Hungarian capital.

But it is Hungary’s flourishing one-billion-dollar-a-year movie industry that has been dubbed “Hollywood on the Danube” that could soon face the axe in the form of tariffs imposed by US President Donald Trump.

“It’s like a meteor heading towards Earth. Either it passes, or it hits us,” top Hungarian tax firm Andersen’s managing director Karoly Radnai told AFP.

“There is no way to adapt. If Trump introduces tariffs, that will be very bad for us.”

Interesting locations, cheap labour costs and a generous cash rebate scheme have made the central European country of 9.5 million people an attractive shooting location.

Among the large variety of foreign productions filmed here are epic sci-fi blockbusters like the “Dune” franchise to arthouse period dramas, such as four BAFTA and three Golden Globe-winner “The Brutalist”.

- Workaround? -

But Trump proposed a 100-percent levy on movies produced abroad in May, claiming the US film industry is “DYING a very fast death”. He reiterated his tariff threat in September.

While experts agree that outsourcing has seriously hurt California’s film industry, they are sceptical whether tariffs can solve anything.

“The current model is so important to Hollywood’s bottom line that producers will figure a workaround the tariffs if they are implemented,” Timothy Havens, a professor at University of Iowa, told AFP.

Budapest – with its eclectic architecture and several modern studios – has become Hollywood’s most important production hub outside the English-speaking world, he noted.

This is especially true for streaming services, he added, due to their signature high-end series that feature spectacular visual elements.

“Those are expensive, whether they are special effects or location shots. In order to be able to afford these they need cheap labour, which Hungary can provide,” Havens said.

Hungary’s government commissioner for film industry development, Csaba Kael, said the tariffs issue has been raised with the Trump administration.

“We would like to move forward,” he told AFP.

In 2023, a record $910 million was spent on foreign film productions in Hungary, according to official figures.

That represents a four-fold increase over five years, and most of the spending is on US productions.

For Hungary, foreign productions bring in more than just money, according to Kael, who also heads the state-owned National Film Institute supporting filmmakers.

While visiting stars posting selfies with Budapest landmarks promote the country’s image abroad, the productions also provide valuable experience to local crews, he said.

“The greatest directors and cinematographers are passing on their know-how,” Kael said, citing “Rise of the Raven”, a Hungarian co-produced historical TV series released this year.

Hungary’s film service industry also gives breakout opportunities to talented artists, such as set decorator Zsuzsanna Sipos.

Sipos initially found work as assistant to more experienced foreign colleagues. She won the Oscar for Best Production Design in 2022 for her work on the first “Dune” movie.

- ‘Could fall apart’ -

Hungary’s film service industry started taking off in 2004, following the adoption of a scheme allowing film projects to register for a cash rebate.

Under the programme, 30 percent of the local production spending is eligible for reimbursement.

The future of that programme is now uncertain after nationalist Prime Minister Viktor Orban’s government suspended new project registrations this June.

While government commissioner Kael has given assurances that it will be sorted out soon, producers fear prolonged uncertainty as the government focuses on other programmes important to voters ahead of crucial elections next year.

On the Budapest film set earlier this month, producer Daniel Kresmery said “for now, things are still working, but it could fall apart very easily.”

“The government needs to show their support properly in the long run again,” warned the US-born Hungarian producer, who works at HeroSquared, one of the several local companies servicing foreign movie productions.