CAPE TOWN - This was supposed to be a big year for Hollywood in China. The five-year World Trade Organization film pact the U.S. and Beijing signed in 2012 was set to be renegotiated, holding out the promise that American studio productions would gain greater access to the world’s second-largest movie market. The industry had expected to see an increase in the number of U.S. films allowed, more access to key viewing windows such as summer, when China’s film authorities rarely allow foreign movies, and a higher share of box-office receipts.

Now it’s looking like Hollywood’s long-awaited payday in China could become collateral damage in the trade war brought on by President Trump’s tariffs. Not only have negotiations about widening access to the market stalled, but some in Hollywood also quietly worry that their films could be targeted in retaliation for tariffs the U.S. has identified for about $250 billion in imports from China. “The timing for this is inopportune,” says Chris Fenton, a trustee of the U.S.-Asia Institute and former president for U.S.-China film company DMG Entertainment. “In fact, the macro environment may be getting worse. It also could lead to the worst-case possibility of China backtracking on past agreements.”

Although it’s uncertain whether movies will end up on the lists of goods the U.S. or China have said might get slapped with new tariffs, the threat to American film exports is clear. Hollywood could be a victim should China choose “qualitative retaliation,” says Kenneth Jarrett, president of the American Chamber of Commerce in Shanghai. That could include a worsening of revenue-sharing terms for film deals. Or China’s film industry regulatory authority, recently shifted to a group within the Communist Party, could simply approve fewer U.S. films for import or limit their runs to low-season periods.

In a January report on China’s WTO compliance, the Office of the U.S. Trade Representative said Beijing had agreed to discuss “policies and practices that may impede the U.S. film industry’s access to China’s market.” This month, however, China said it is “forced to retaliate” for the Trump tariffs but didn’t set targets. The Office of the U.S. Trade Representative declined to comment on the current status of the film talks. “We are hopeful both governments can continue to work together,” Chris Ortman, a spokesman for the Motion Picture Association of America Inc., said in an email.

Movies could be especially vulnerable to China trade actions because they’re one of the very few U.S. imports that dramatically exceed exports. U.S. companies “are worried about regulatory retaliation, whether approvals will be hung up, or you could see a slowdown in the imports of Hollywood movies,” Jarrett says.

U.S.-made films’ share of China’s $8 billion market is on track to decline for a third year, an analysis of data from Box Office Mojo shows. U.S. studios in recent years have been losing ground to local films such as Wolf Warrior 2, a nationalistic action flick that last year became China’s best-performing movie. And American releases increasingly are bested by Bollywood imports such as Secret Superstar, a big hit on the mainland made for a fraction of the budget of a typical Star Wars or Avengers movie. “Hollywood blockbusters have seen better days in China,” says Chen Qin, who researches China’s film market at Fudan University’s School of Economics. “Even if China increases Hollywood’s access to the market, those films are still not going to sell well.”

That’s in part because of the fast audience growth in China’s smaller cities, where patrons have less exposure to Western culture and are more likely to choose films with Chinese themes, Chen says. Many viewers across China are also unfamiliar with the characters and plots of older American film franchises, so they don’t get much out of watching the latest installment—one reason Star Wars movies have fared relatively poorly there.

Winning viewers in China is crucial for the six biggest Hollywood studios, which have come to rely more on superhero and franchise action films. China’s box-office revenue grew about 20 percent in 2017, compared with a 2 percent decline in the U.S. and Canada, according to data from the MPAA. The U.S. and Canadian industry was able to eke out a 2 percent gain in revenue from 2013 to 2017, but only by raising ticket prices.

China’s state-owned film distributors typically pay American studios just 25 percent of the revenue their films generate in China. That’s half the rate studios get in the U.S. The distributors also control release dates and marketing. Still, Chinese audiences sometimes help Hollywood studios make up for their movies’ poor domestic performances. Uprising, the latest installment in Legendary Entertainment’s Pacific Rim film franchise, collected about $100 million in China and just $59 million at home, according to Box Office Mojo. A new Tomb Raider movie in March took in almost $79 million from China and only $57 million in the U.S.

Even with market share shrinking, U.S. studios’ total revenue from China is likely to rise because the audiences are growing so fast. And a stronger Chinese movie industry could even be good for Hollywood if it makes the authorities less concerned about keeping out overseas competition, analysts say.

At the same time, the boom in theater construction in smaller cities has helped boost box-office results for local nationalistic fare over Hollywood blockbusters. For example, on the heels of Wolf Warrior 2’s success in 2017, another Chinese military action movie, Operation Red Sea, is leading box-office sales this year.

Hollywood films accounted for almost 38 percent of total China revenue in the first half of this year, analysis of Box Office Mojo data on the 50 biggest films in the period shows. That’s down from 48 percent in 2016. The waning pull of U.S. blockbusters is seen even more clearly in audience numbers per screening. Based on calculations using Maoyan Movie data on the top 10 films in the first half, Hollywood movies averaged 16 seats sold per screening, compared with 28 for Chinese productions. (The Chinese government tracks box-office sales but doesn’t report on the national origin of films.)

In China, unlike in the U.S., Indian movies are becoming potent rivals. Bollywood’s Secret Superstar raked in 747 million yuan ($111 million) earlier this year, beating U.S. blockbusters Black Panther and Star Wars: The Last Jedi. Last year the Indian film Dangal grossed about $193 million in China, more than the Walt Disney Co. hits Coco and Pirates of the Caribbean: Dead Men Tell No Tales.

With trade tensions flaring and Hollywood’s hold on China’s filmgoers fading, U.S. studios may have to calibrate their demands for an end to the annual quota. “Hollywood needs to be careful,” industry executive Fenton says. “More films in the China market may dilute the performances respectively of each, causing more films to lose money than to profit. As a result, U.S. studios may be better off lobbying for an increase in the percentage of ticket sales from the 25 percent they get currently as the overall top request.”