Six things to know about Trump’s tariffs on video games
Microsoft, Sony and Nintendo join forces to oppose Trump’s trade war against China
Only few things in this world could bring video games rivals Microsoft, Nintendo and Sony together. It’s like seeing Professor X and Magneto holding hands.
So what brought them together? President Donald Trump’s plan to tax Chinese imports, which includes a 25% tariff on video game consoles -- part of the ever-escalating trade war with China.
As 96% of all consoles are made in China, the gaming giants claim in the letter that Trump’s plan will hurt the industry as a whole. But what does it mean for consumers? Here are six things you need to know.
1) Will consoles become more expensive?
Whether that actually happens is a whole other story. It’s worth noting that consoles are traditionally sold with thin profit margins, and sometimes sold at a loss early in their life cycle. But the PS4 and Xbox One are on the other end of the cycle, when more efficient parts and economies of scale kick in, making them cheaper to build. Whether they’re cheap enough for Microsoft and Sony to eat the added cost of tariffs is another question.
2) Will games be more expensive?
You’d think games, being software, are immune to tariffs. But the three gaming giants say there will be a knock-on impact.
In their letter, Microsoft, Nintendo and Sony point out that, should console sales fall as a result of theoretical price hikes, then fewer gamers with consoles would mean fewer people buying games. And fewer people buying games is obviously bad news for game publishers, no matter where they're from.
Beyond that, they specifically called out the impact on indie game developers, whose games are often supported and promoted by the big console manufacturers (like, say, Nintendo’s “Nindies” YouTube streams highlighting indie games). In the joint letter, the three companies say that declining console revenue could lead to reduced support for those developers.
3) What else will be more expensive?
4) Why is the trade war hurting these companies so much?
Now you might be wondering: Hang on, Nintendo and Sony are Japanese companies. Why are they affected by the trade war between the US and China?
Well, for starters, 96% of all consoles are made in China. No matter where the company is from, the vast majority of their consoles are made in China. So, y’know, there’s that.
So if the US is such a key market, why can’t they make their consoles there? The same reason everyone else makes electronics in China. The three companies said in their letter that it would cause a significant supply chain disruption to move production to the US.
5) Will tariffs on China help the US games industry at all?
The three gaming giants -- one of which is actually American, don’t forget -- don’t think so.
As for the overall impact these tariffs will have on the US, the three companies quoted a study by Trade Partnership, which says that the US economy will suffer a net US$350 million loss for each year the tariffs remain in effect. And the gaming giants warn that US consumers will be the ones paying for it.
6) How are people feeling about this?
Chinese gamers are also paying close attention to this. Many netizens are shocked by how President Trump has managed to do the impossible… getting all the gaming giants on the same team.
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