In the middle of 2019, then-President Donald Trump threatened to expand current tariffs on industrial parts and other items to popular consumer products such as iPhones, laptops, and video game consoles. Major gaming competitors Microsoft, Sony, and Nintendo joined forces to try and prevent the upcoming import taxes. They warned that a 25 percent price increase could make new video game consoles unaffordable for many American families looking to purchase one during the holiday season. The companies estimated that consumers would end up paying $840 million more than they would have without the tariffs. Due to pressure from large companies, including tech giants like Apple, Trump postponed the implementation of the tariffs and eventually made exceptions for popular consumer devices. This move prevented a 25 percent tax on the Nintendo Switch that Christmas. The PlayStation 5 and Xbox Series X/S were launched the following year due to pandemic-related shortages rather than price increases caused by tariffs.
Fast forward four years later, Trump has been re-elected with a promise to impose even higher tariffs on all items Americans purchase. The proposed tariffs include a 60 percent import tax on goods made in China and a 10-20 percent import tax on items manufactured outside the U.S. The president-elect has stated that imposing new tariffs on goods from China, Mexico, and Canada will be a priority on his first day in office. The aim is to increase tax revenue while creating more well-paying jobs in the U.S. However, a study published by academics from MIT, Harvard, and other institutions earlier this year found that recent tariffs had minimal impact on employment. The thought of gaming consoles being manufactured in the U.S. anytime soon seems unlikely. Some experts believe that an empowered Trump may not back down this time, potentially leading to an escalated trade war.
Tariffs are taxes placed on goods imported into a country, often passed on to consumers through higher prices. A 60 percent tariff does not necessarily mean that a PS5 or Xbox Series X made in China will instantly cost $800 at retailers, but experts predict that most of the tax burden will fall on customers rather than companies. The Consumer Technology Association (CTA) released a report estimating that tariffs could increase prices for gaming consoles and related products by around 40 percent, leading to a $7 billion additional cost for consumers. Accessories and products like charging cables and TVs would also see price hikes.
These tariffs could lead to a significant increase in hardware costs, potentially reshaping the gaming industry in the U.S. Joost Van Dreunen, a lecturer at NYU Stern School of Business, believes that tariffs could alter console sales and prompt a shift towards cloud gaming, streaming services, and digital downloads. This transition could impact not only hardware sales but also game publishers, studios, and related businesses that rely on player spending. The potential decline in console sales due to tariffs could have long-lasting effects on the gaming industry.
As companies prepare for the impact of tariffs, some are considering moving manufacturing out of China to other countries like India. Nintendo has already started shifting some production to Vietnam, while Sony’s hardware costs could rise significantly if tariffs are imposed. Microsoft, with a more diversified manufacturing base, may be in a better position to weather the storm. However, the shift to non-China production could take time and lead to increased costs for consumers.
The future of gaming in the U.S. could be drastically altered by tariffs, with implications for console sales, game distribution, and player spending. While the outcome remains uncertain, gamers may face higher prices for consoles and games if tariffs are implemented. The impact of tariffs on the gaming industry is a topic of concern for experts and analysts, as it could lead to fundamental changes in how games are accessed and consumed by players.
