In mid-2019, then-President Donald Trump threaten to extend Existing tariffs apply to industrial parts and other goods, as well as popular consumer products such as iPhones, laptops and video game consoles. Longtime gaming rivals Microsoft, Sony and Nintendo have joined forces to try to fend off upcoming import taxes.
“A 25% price increase would likely put a new video game console out of reach for many U.S. households, who we expect will be in the market to purchase a console this holiday season,” the companies wrote in a statement. joint open letter June 18, 2019.
It worked. Pressure from big companies, including tech giants like Apple and other electronics makers, forced Trump to delay the implementation of the tariffs and eventually give exceptions Completely compatible with popular consumer devices. That Christmas, the Nintendo Switch was exempt from the 25% tax. The PlayStation 5 and Xbox Series X/S launched the following year due to shortages caused by the pandemic rather than price increases caused by tariffs. The video game industry moves forward.
But four years later, Trump won re-election on a promise to impose higher tariffs on everything Americans buy. These include a proposal to impose a 60% import tax on any product assembled in China and a 10-20% import tax on other products manufactured outside the United States. New tariffs on goods will be Day one priorities. The goal is to increase tax revenue while increasing high-paying U.S. jobs, but a joint study Published earlier this year by scholars at MIT, Harvard and elsewhere It was concluded that the impact of recent tariffs on employment was minimal. No one thinks the console will start production in the U.S. anytime soon.
There is no sign of price reduction for mid-generation products yet
Some industry observers and experts believe Trump is less likely to back down this time. “I think companies are taking this very seriously this time,” said Mary Lovely, an economics professor at Syracuse University’s Maxwell School of Citizenship and Public Affairs. my city In a phone interview. She worries that even if Trump’s initial offer is lower than the 60% tariff on China, the trade war could escalate quickly and get out of control. “That’s the threat he poses and that’s what we might face.”
A tariff is a tax levied on goods imported into the country. They are levied against companies that bring products into the United States, But it is often passed on to consumers In the form of higher prices. These changes are not one-to-one. A 60% tariff doesn’t necessarily mean that the price of a China-made PS5 or Xbox Series X will suddenly jump to $800 at Walmart or Best Buy. But experts generally agree that most of the tax will hit consumers’ wallets rather than company profits. Walmart, Best Buy and other stores Already saying The result would still be significant price increases compared to what people are paying now.
The Consumer Technology Association (CTA), a trade group representing hundreds of companies that would be affected by the tariffs, released a report in October claiming that the tariffs would increase the price of game consoles and related products for consumers by about 40%. “U.S. consumers are willing to pay $7 billion more for video game consoles,” The report claims. The report goes on to predict: “As a result, U.S. consumers are purchasing 57% less overall.” Accessories and related products, from charging cables to TVs, will also become more expensive.
“The model we use assumes that suppliers pass on all additional costs of tariffs to consumers,” said Richard Kowalski, CTA’s senior director of business intelligence. my city in an email. “The model also assumes that tariffs will stimulate some alternative purchasing. But given the limited alternative sources available, most consoles will still come from China.
Switch prices range from $300 to over $400. The price of the PS5 Pro will rise from $700 to nearly $1,000. Nvidia graphics cards used to build gaming PCs will see similar spikes, as will the growing line of PC gaming handhelds like the Steam Deck and Asus Rog Ally. The Switch 2 is expected to be available as soon as March 2025, but the hybrid console will cost nearly twice as much as its predecessor in the United States, and its first-year sales may suffer.
Nintendo is a gaming company that has begun moving some of its manufacturing operations from China to neighboring Vietnam. David GibsonA senior analyst at MST Financial estimates that about 50% of switches are currently manufactured outside China, but he still expects prices to rise as much as 35% if currently proposed tariffs take effect.
Alternatively, Nintendo could try to reserve Switch inventory produced outside China for the U.S. market, which accounts for about 40% of the global console market. He also estimated that the PS5’s manufacturing ratio is close to 70% in China and 30% in Japan and elsewhere, which means Sony’s hardware costs will rise even more. Microsoft’s Xbox, on the other hand, already has more features Diversified manufacturing basein addition, the company spent much of 2024 downplaying the importance of selling new consoles.
At the same time, how will companies respond? Gibson said Nintendo, Sony and other companies will seek to increase imports before Trump is sworn in on January 20 and begin to move more manufacturing capacity to other countries such as India. “I expect a full shift to non-China production within 12 to 24 months of the news breaking,” he wrote in an email my city. “[It] It typically takes six months to install the equipment, and even longer to find or build the facility. By then, costs will likely be nearly 10% higher than now, and companies like Sony may consider absorbing more costs to continue to expand PS5 installations, thereby reducing profit margins. However, Lovely says other countries are not ready to absorb this demand. “India is not ready yet,” she said.
Tariffs could fundamentally change gaming’s trajectory
But higher hardware costs are just the beginning of how tariffs will reshape the U.S. gaming industry Jost van DrunenA lecturer at New York University’s Stern School of Business believes the toughest tariffs will significantly reshape the gaming console landscape in the coming years. “The data suggests that tariffs will not only impact sales but could permanently change the console industry’s role in American gaming culture,” he writes in the book. his latest version Super fun playlist communication. He estimates that in the worst-case scenario, total console sales in the United States will fall below the levels of the early 2000s, “despite two decades of market expansion and a significant increase in the gaming population.”
Van Drunen speculates that one possible outcome of this situation is that U.S. players will begin to turn to other ways of accessing the game. “These tariffs could quickly drive the industry’s shift toward cloud gaming, streaming services, and cross-media distribution, marking a classic shift in the pendulum cycle from content innovation to distribution innovation,” he wrote.
Physical games may also die out faster as gamers turn to duty-free digital downloads and cheaper digital-only versions of existing PlayStation and Xbox consoles. Or, as Circana executive director and video game industry analyst Mat Piscatella recently speculated, the company could Effectively raising the price of digital games to make up for rising suggested retail prices on store shelves.
image: Circana / Matt Piscatella / X
Not to mention all the publishers, game studios, and related businesses that rely on players spending hundreds of dollars every year on new releases, battle passes, and subscriptions. have been significantly reduced over the past two years big company and small because Rising interest rates and fading pandemic-era prosperity. Tariffs will effectively suck out more player spending on games and game makers. some analysts believe The growth of the video game industry has lagged behind previous forecasts.
“If the campaign promises are fulfilled, I expect console prices to rise and sales to fall,” said Chris Clarke. Economist at Washington State Universitywrote in an email my city. “The U.S. currently produces about 1% of its gaming consoles. Even if these tariffs are phased in, these costs will be fully passed on to consumers because there will be no other equally priced options…While U.S. production may increase, it will only be at a relatively Ultimately, American gamers will bear the burden of these taxes.
Of course, this all depends on what actually happens over the next six months. If history is any indication, Trump may threaten steep tariffs only to receive small trade concessions from other countries, declaring victory despite minimal changes to the status quo. Big tech and gaming companies could also once again successfully lobby the incoming administration to be excluded from the top tariff rates, as they did in 2019. Some of the reasons why several CEOs, including Satya Nadella I recently rushed to congratulate Trump About his electoral victory.
Or the president-elect could simply make good on one of his biggest campaign promises and spur a new wave of game price hikes after companies hiked them in the wake of post-pandemic inflation. “If these tariffs go into effect, gamers can expect to pay for their next console (and other products!),” CTA’s Richard Kowalski wrote in an email to them. More fees. my city. “Tariffs are taxes paid by American consumers and businesses, and they stifle innovation because businesses devote scarce resources to paying tariffs instead of employing American talent to work on cutting-edge technologies.”
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