Earlier this month, U.S. President Donald Trump, announced plans to escalate an ongoing trade war with China by increasing tariffs on imports to 25 percent. This move is designed to force China to renegotiate their trade deals with regard to their exports into the country, but businesses who would be feeling the brunt of the this tax are sounding off against this proposed expansion of plans. This list now includes video game hardware manufacturers, as Nintendo, Sony, and Microsoft have drafted and signed a letter asking the administration to reconsider and warning them of the consumer downside.
The letter, which totals seven pages, is written by the general counsel for each of the three companies and is addressed to Joseph Barloon, general counsel to the Office of the United States Trade Representative. The letter makes several points, but the biggest takeaway is that the companies are asking for an exception to the tariffs based on how ruinous it would be for console sales.
“While we appreciate the Administration’s efforts to protect U.S. intellectual property and preserve U.S. high-tech leadership, the disproportionate harm caused by these tariffs to U.S. consumers and businesses will undermine—not advance—these goals,” the letter reads. “Accordingly, we respectfully request that the Administration remove HTSUS subheading 9504.50.00, covering video game consoles, from the final list of tariffs, and thus refrain from applying tariffs on these products.”
One of the points made in the letter is that, beyond harming companies that manufacture parts (or entire consoles) in Japan, this would also affect the American development industry quite a bit. The idea is that expanded tariffs would mean console manufacturers would no longer be eating the cost for MSRP and would have to significantly raise the prices on consoles to make manufacturing them worth selling, thus limiting the amount of consoles that could be sold, and thus further limiting the number of people willing to buy games.
As Microsoft and Sony have already announced their successor consoles, the two companies are likely uneasy trying to figure out whether manufacturing in China will continue to be economically viable, as it is usually significantly cheaper, more efficient, and has the required expertise for console hardware. Rumors are also swirling that Nintendo is hastily moving manufacturing around to minimize their tariffs for an also-rumored new Switch model later this year.
If the administration chooses to go forward with the tariffs, it will likely decide how newer consoles are priced when the Scarlett and PlayStation 5 inevitably get detailed sometime in the next year.