Will Trump's Tariffs Raise Video Game And Console Prices? Here's What We Know

As a long-time gamer and tech enthusiast, I find myself deeply concerned about the potential impact of President Trump’s proposed tariffs on the video game industry. Having witnessed the evolution of gaming from arcade cabinets to modern consoles, I can’t help but feel a sense of deja vu as we find ourselves in another battle against protectionist policies.

One of the main topics frequently discussed by President-elect Donald Trump during his election campaign was the issue of tariffs. More specifically, he mentioned potential tariff rates exceeding 60% on goods imported from China. Given that video game consoles, accessories, and other video game and technology products are partially or mainly produced in China nowadays, many people are curious about how these proposed tariffs might affect consumers.

People are curious if the prices of video game consoles and games might increase substantially, as some experts suggest. With the anticipated launch of Switch 2 in 2025 and the highly-anticipated Grand Theft Auto VI set to be released next year, this topic is becoming increasingly relevant.

At this point, there are no concrete solutions available. Some economic experts argue that imposing 60% tariffs might be impractical. It’s uncertain whether Trump will proceed with his proposed plans after he assumes office in January, or even at all. To provide a clearer understanding of the situation during these initial stages, we consulted analysts and gathered other insights about the potential effects of tariffs on video games.

“There’s Going To Be A Lot More Tariffs”

A tariff refers to a tax levied on products as they enter one country from another. It’s important to note that this practice dates back in America, not long after the Constitution was ratified over two centuries ago. In scenarios where import tariffs are applied, such as this case, it’s usually the final consumer who bears the cost. This happens because importers increase prices to offset their losses and then pass these higher costs onto consumers.

Translated: Professor Tu Xinquan, head of the University of International Business and Economics at Beijing’s China Institute, informed The Associated Press that no entity could sustain a 60% tariff. If this were implemented, businesses would cease all trade with the United States entirely, according to his statement.

In the course of his first presidency, Donald Trump imposed tariffs on goods from China amounting to hundreds of billions of dollars. This move led to a decrease in imports initially, followed by a resurgence. The aim was to bolster the US manufacturing sector, but analysts argue that this goal wasn’t achieved. Joe Biden retained these tariffs and even introduced additional ones, such as those for steel and electric vehicles. Trump’s proposed tariff expansion could extend to video games. Some speculate that if Trump is re-elected, he may show greater audacity and assertiveness in his second term.

As a gamer, I’m here to share some insights about the latest news: It seems like there will be a significant increase in trade taxes, and it’s not exactly a secret. Michael Stumo, head of the Coalition for a Prosperous America, made this clear to the Associated Press. Now, if I were to interpret what Jen Harris, a former White House official who worked under Biden, said, her main worry is that these tariff proposals could potentially give companies a chance to inflate prices.

Just a while ago, Trump stated on the December 8th edition of NBC’s Meet The Press that his proposed tariffs could potentially lead to increased prices for consumers at checkout. “I can’t promise anything,” he said in an interview, adding, “I can’t guarantee it will be different tomorrow” when asked if consumers might end up paying more with the enactment of his import taxes.

An Unwelcome Development For Video Games

Lately, the video game sector has encountered turbulent periods, marked by significant publishers reducing expenses via game cancellations, layoffs, shutting down studios, and other cost-cutting measures. However, potential new tariffs on the horizon as the industry prepares for a comeback in 2025 might pose challenges, experts caution.

According to Piers Harding-Rolls from Ampere Analysis, the possible implementation of tariffs for video game imports in the U.S. is a less than ideal situation for the industry. He added that this development comes at a particularly challenging time due to ongoing cost-cutting efforts, slower market growth, escalating R&D expenses, and overexpansion during the pandemic, all of which are already straining the industry.

According to Wedbush Securities analyst Michael Pachter, since both Microsoft and Sony have American branches, any game downloads they sell (which are increasingly significant in total game sales) won’t be subjected to tariffs. In contrast, he hypothesized that Nintendo may need to establish a US subsidiary to bypass tariffs on digital game sales. His reasoning is that Nintendo could set up a US subsidiary to license the rights for selling games in the U.S., charging around $1 per unit. This way, they would pay tariffs only on the dollar amount, while their other digital sales would remain tariff-free.

In terms of games sold physically, while they make up a smaller portion of total sales yet remain significant statistically, according to Circana’s Mat Piscatella, imposing import taxes would lead to higher prices for consumers. As a result, publishers might increase the cost of digital games to match this price level. Alternatively, they could stop producing physical games altogether. Piscatella expressed that neither option is favorable. “I may sound old-fashioned,” he added, “but I’m more of a free-market advocate. Choosing an isolationist/protectionist path rarely benefits the average person.

In regards to new gaming hardware, Pachter stated that companies such as Nintendo, Sony, and Microsoft could manufacture their systems in tariff-free countries or even the United States. Analyst David Gibson, who specializes in covering Nintendo for MST Financial, informed Yahoo News that Nintendo had anticipated this situation years ago and is currently producing approximately half of all Switch consoles outside of China, in locations like Vietnam. However, Gibson predicts that if Trump’s import tax proposals are implemented, the cost of a Switch 2 (and potentially its price) might increase. He approximates that Sony manufactures around 70% of PlayStation devices in China, with the remaining portion being produced in Japan and other regions. On the other hand, Microsoft has been moving its manufacturing operations away from China for several years now.

According to Harding-Rolls, the primary effect of potential import taxes would be a significant impact on the domestic video game console market. Given that the U.S. represents approximately 45% of global spending on games and 35% of console hardware sales volume, such tariffs could potentially cause disruption within the worldwide console market. This is because they might weaken US hardware sales, postpone the adoption of new consoles by consumers, and even lessen consumer spending capacity for games and related services to compensate for these price increases.

Even if there are no fresh import taxes implemented, Harding-Rolls predicts that the Switch 2 will debut in Q2 2025 at a more expensive price compared to the initial Switch. If any new foreign tariffs arise, they could greatly impact Nintendo’s plans and potentially cause an even greater increase in the price of the eagerly awaited new console, according to Harding-Rolls.

This decision could have severe consequences for gamers. It’s unlikely that China will shoulder the costs; instead, it might fall on American consumers.

He pointed out that for pioneering users, a higher initial cost is unlikely to prevent them from purchasing the platform; however, it might lessen interest in 2026 and beyond. He also mentioned that there have been discussions about increased adoption of cloud gaming services due to potential hardware price hikes, but this doesn’t apply to games specifically designed for the Nintendo Switch/Switch 2 platforms, which will include Nintendo’s own games developed for those systems.

Serkan Toto of Japanese consulting firm Kantan was blunt in his assessment of how new import taxes could affect the end consumer. “The effects would be devastating for game fans,” he told Digital Trends. “China would not pay for this: the US consumer would.”

$100 games?

The Consumer Technology Association (CTA) released a report in October, predicting that potential new taxes on tech products could boost prices significantly across the board. For video game consoles, this increase might reach as high as 40%, potentially raising the cost of a PS5 from $500 to $800 in the US, and increasing game prices from $70 to $112, according to Toto’s rough calculation. However, it’s important to note that these numbers might not hold true for various reasons, as this scenario remains speculative and uncertain at present. Nevertheless, major retailers like Walmart, Best Buy, and others have expressed concern that Trump’s proposed import taxes could lead to substantial price hikes for a wide variety of goods.

Without a doubt, one of the most highly anticipated video game launches in 2025 is Grand Theft Auto VI. Some gaming analysts have even speculated that Take-Two Interactive might price it above $70. Given the escalating costs of AAA game development over the past few years and a lack of corresponding increase in the cost of new games, this prediction seems plausible – a point emphasized repeatedly by former PlayStation executive Shawn Layden in various interviews.

Will Microsoft, Sony, And Nintendo Fight The Tariffs Like They Did In 2019?

It’s uncertain whether Trump’s proposed tariffs will materialize as planned or not. However, if they do, there’s a chance video game products might be exempted. Some might remember the Consumer Technology Association (CTA) collaborating with Microsoft, Sony, and Nintendo during Trump’s initial presidency to counter proposed tariffs. They were ultimately successful in their efforts.

In essence, imposing tariffs on video game consoles could harm consumers, game developers, retailers, and manufacturers alike, jeopardize numerous valuable American jobs, hinder innovation not only within our sector but also beyond,” as the CTA’s letter from 2019 stated.

On November 27th, Gary Shapiro, our CEO at the Consumer Technology Association (CTA), voiced his concern about potential trade taxes. He warned that these taxes, if enforced, could lead to a significant increase in prices for American consumers and negatively impact our economy. The CTA estimates that these new tariffs, as currently proposed, would affect over $350 billion worth of imports on technology products coming from not just China, but also Mexico and Canada. Considering these worries, it’s clear that the CTA will strive to influence policymakers again, either to halt these tariffs or create exceptions similar to what they achieved in 2019.

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The professor predicts that Microsoft, Sony, and Nintendo may join forces to ask for an exception, similar to what they successfully did before, a viewpoint also held by Harding-Rolls.

During Trump’s prior term, Microsoft, Sony, and Nintendo collaborated effectively to secure a tariff exemption on imports. Here’s hoping the video game industry avoids these tariffs once more, according to his statement.

It appears that TopMob has attempted to contact Nintendo, Microsoft, and Sony to determine whether these tech giants are planning a joint effort similar to their 2019 alliance aimed at tackling import tariffs. However, as of now, no replies have been received from any of the companies.

Tariffs Leading To Changing Consumer Behavior

One aspect to consider with these suggested tariffs is how they might disrupt the video game market by altering the way people enjoy games. According to Van Dreunen, if console prices increase due to these tariffs, players may opt for “platform-agnostic” methods to play their preferred games. He suggests that these tariffs could accelerate the industry’s movement towards cloud gaming, streaming services, and multi-media distribution, which would represent a traditional progression from content creation to distribution innovation in the cycle of innovation.

Microsoft is actively venturing into this field through Game Pass and their cloud-gaming service, transforming any internet-connected screen into an Xbox. Although they primarily deal in consoles, with some suggesting that the console market isn’t expanding, Microsoft is exploring innovative strategies to connect with consumers where they reside. Van Dreunen believes Sony may also consider less expensive distribution methods, pointing to the unexpected success of the PlayStation Portal device as evidence. There are rumors that Sony could go further in this aspect by introducing a dedicated PS5 portable gaming device. “Even with increased tariffs,” he said, “the PlayStation Portal would still be a practical alternative compared to upgrading to the next iteration of the PlayStation.

Lots Of Unknowns

As a gamer, I can’t help but ponder about Trump’s game plan and whether his proposed strategies, like the new import taxes, will actually materialize. If he decides to push through with this idea, he might encounter resistance from both legislators and the public. The AP has even reported that House Democrats have prepared legislation aimed at stripping presidents of their power to impose tariffs without prior approval. This move is seen as a symbolic gesture given the current Republican control of the House and Senate under Trump. Suzan DelBene, a Democrat from Washington, strongly believes no president, regardless of party, should possess the authority to arbitrarily increase costs for the American people through tariffs. Time will tell if Trump decides to take this risk.

2024-12-11 20:41

Will Trump’s Tariffs Raise Video Game And Console Prices? Here’s What We Know