In mid-2019, then-President Donald Trump Threatening to extend the time Customs duties on industrial components and other goods Available for popular consumer products such as iPhones, laptops, and video game consoles. Three giant companies, Microsoft, Sony, and Nintendo, have long been competitors in the gaming industry. They banded together to try to prevent tariffs on incoming imports.
“An additional 25 percent price increase is likely to make new video game consoles out of reach for many American families that we expect will enter the console market this holiday season,” the companies wrote in a statement. shared public mail on June 18, 2019 “for purchases that continue despite tariffs Consumers will pay $840 million more than they deserve…”
It worked, pressure from big companies. This includes tech giants like Apple and other electronic device manufacturers. forcing Trump to delay the imposition of tariffs, and eventually making exceptions For all the popular consumer devices, there was no 25 percent tax on the Nintendo Switch at Christmas, with the PlayStation 5 and Xbox Series X/S launching the following year due to shortages caused by the pandemic. Instead of raising prices according to taxes The video game industry is moving forward.
But four years later Trump won re-election by promising to impose higher tariffs on everything Americans buy. This includes a 60 percent import tax on any goods assembled in China. and import taxes of 10-20 percent for other products Manufactured outside the United States On November 25, the president-elect promised to impose new tariffs on goods from China. The same will be true for Mexico and Canada. One day priorities– The goal is to increase tax revenue while promoting good-paying jobs in the United States. But it is a joint study. It was published earlier this year by academics from MIT, Harvard and elsewhere. It concludes that the impact of the latest tax rates on employment is minimal. No one thought gaming consoles would start being produced in the United States any time soon.
No mid-gen price cut in sight
Some observers and industry experts think an emboldened Trump is less likely to retreat this time. “I think companies There’s a lot of focus on this right now,” said Mary Lovely, professor of economics at Syracuse University’s Maxwell School of Citizenship and Public Affairs. Kotaku in a telephone interview She worries that even if Trump starts with an opening bid of lower than 60 percent tariffs on China, But there is a chance that the trade war that has erupted will quickly spiral out of control. “That’s what he threatened. That is what we have to face.”
Customs duties are taxes levied on goods imported into a country. They are charged by companies that bring products in the United States. But it is often passed on to the consumer. in the form of higher prices The change isn’t one-for-one. A 60 percent tariff doesn’t mean a Chinese-made PS5 or Xbox Series customer Instead, it’s the profits of Walmart, Best Buy and other stores. Already talking The result will still lead to significant price increases compared to the prices people are paying now.
The Consumer Technology Association (CTA), a trade group representing hundreds of companies that would be affected by the tariffs. Report released in October It claims the tax will increase prices for consumers by about 40 percent when it comes to game consoles and related products. “American consumers will spend an additional $7 billion on video game consoles.” The report claims that– “Consequences” further predicts that “Consumers in the United States 57 percent reduction in overall purchases.” Accessories and related products, from charging cables to TVs, will also be more expensive.
“The model we use assumes that suppliers pass on the entire extra cost of tariffs to consumers,” said Richard Kowalski, CTA’s Senior Director of Business Intelligence. Kotaku In the email, “The model also assumes that tax rates provide an incentive to provide alternatives. But with limited alternative sources Most console games still come from China.”
The Switch will go from $300 to more than $400, the PS5 Pro will go from $700 to nearly $1,000, Nvidia graphics cards for building gaming PCs will see similar growth. Like the growing line of PC gaming portables like the Steam Deck and Asus Rog Ally, the Switch 2, expected to arrive in early March 2025, could see sales in its first year surpass console-hybrid stickers. Rides are nearly twice as expensive as their predecessors in the United States.
Nintendo is one of the gaming companies that has started moving some of its production out of China to neighboring Vietnam. David GibsonSenior analysts at MST Financial estimate that at this point about 50 percent of switches are manufactured outside of China. But he still predicts prices will increase by as much as 35 percent if the currently proposed tariffs take effect.
Alternatively, Nintendo might try reserving stock of Switches made outside of China for the U.S. market. This represents approximately 40 percent of the global console market. He also estimates that PS5 production is close to 70 percent in China and 30 percent in Japan and elsewhere. This means that Sony’s hardware costs will increase even more. Microsoft’s Xbox, on the other hand, already has a lot more to offer. Diverse production baseAside from the fact that the company spent most of 2024 downplaying the importance of selling new consoles.
How will companies respond in the meantime? Gibson suggests that Nintendo, Sony and others It will try to increase imports before Trump is sworn in on January 20 and begin moving additional capacity to other countries like India. fully within 12-24 months of news release,” he wrote in an email. Kotaku– “(It usually) takes 6 months to install equipment. And it takes longer to find or build a facility.” At that point The costs could be nearly 10 percent higher than they are now, and companies like Sony may be looking to absorb more of these costs in order to profitably expand the PS5 install base further. However, Lovely suggests that the country other Not ready to accommodate such needs “India is not ready,” she said.
Tariffs can radically change the way the game is played.
But higher hardware costs are just the beginning of how the tariffs will change the gaming landscape in the United States. Joost van Droinena professor at NYU Stern Business School, believes the most aggressive tariffs will have a dramatic effect on the console landscape in the next few years. “The data indicates that the tax will not only affect sales volumes. But it could also permanently change the console industry’s role in U.S. gaming culture,” he wrote in His latest edition Super Joost playlist Newsletter– In the worst case He estimated that overall console sales in the US It is lower than it was in the early 2000s, “despite two decades of market expansion and a dramatically expanding gaming population.”
One possible outcome of this situation, Van Dreunen predicts, is that Players in the United States are starting to turn to other ways to access games. “These tariffs could follow the industry’s shift towards cloud gaming. Streaming service and distribution through the media quickly This is a classic shift from content innovation to distribution innovation in a pendulum cycle,” he wrote.
Physical games may die out even faster as players switch to tax-exempt digital downloads and cheaper digital-only versions of PlayStation and Xbox consoles. Or so says Mat Piscatella, executive director and video game industry analyst. As Circana recently predicted, companies can It actually drives up the price of digital games. To compensate for the increased MSRP on physical store shelves.
Not to mention all the publishers, game studios, and related businesses that rely on players spending hundreds of dollars each year on new game releases, battle passes, and subscriptions. The past two years have already seen a significant decline. Big companies and small due to Interest rate hikes and growth recovery in the pandemic era– Tariffs will suck a lot of the spending players out of the games and the people who created them during that time. Some analysts argue The video game industry has lagged behind previous growth projections.
“If the campaign is as promised I expect console prices to increase. And sales will drop later.” Chris Clarke Economist from Washington State UniversityWrite in an email to Kotaku– “The United States currently produces about 1 percent of consoles, but even if these tariffs are phased in, all of these costs will be passed on to consumers. Because there are no other options available at the same price…while production may increase in the USA. But it will do so only at higher consumer prices compared to today. In the end American gamer will have to bear the burden of these taxes.”
Of course, this all depends on what actually happens in the next six months. If history is any indication, Trump may threaten major tariffs only to back off on them in exchange for minor trade concessions from other countries. by declaring victory despite little change in the status quo. Big tech and gaming companies were once again able to successfully lobby the incoming administration to waive top tax rates, as they did in 2019. That’s no doubt why many CEOs, including Microsoft’s Satya Nadella, Most recently, he rushed to congratulate Trump. about his election win
Or the president-elect could deliver on one of his biggest campaign promises and trigger a new wave of gaming prices. After many companies Prices have already increased in line with post-pandemic inflation. “If these taxes come into effect Gamers can expect to pay significantly more for the next gaming console. (and other products too!),” CTA’s Richard Kowalski wrote in an email to Kotaku– “Tariffs are taxes that U.S. consumers and businesses pay, and they stifle innovation because companies Divert scarce resources into paying taxes. without hiring American talent to work on cutting-edge technology.”
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