Many major tech companies have been contacting the US government regarding its proposed tariffs on products manufactured in China. Up to this point, we have mostly been hearing from PC hardware and OEMs like Apple, Intel etc. Today, Microsoft, Sony and Nintendo released a joint letter regarding these tariffs, strongly warning the US of the pitfalls involved with increasing costs.
This is the first time we've heard about how the US trade war with China can impact the gaming market. The three big console makers warn that new and increased tariffs on video game consoles would “injure consumers, video game developers, retailers and console manufacturers”. It would also put “thousands of high-value U.S. jobs at risk and stifle innovation”.
The letter goes on to say: “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”.
“In 2018, over 96% of video game consoles imported into the United States were made in China. The video game console supply chain has developed in China over many years of investment by our companies and our partners. It would cause significant supply chain disruption to shift sourcing entirely to the United States or a third country, and it would increase costs—even beyond the cost of the proposed tariffs—on products that are already manufactured under tight margin conditions. Each video game console comprises dozens of complex components sourced from multiple countries. A change in even a single supplier must be vetted carefully to mitigate risks of product quality, unreliability and consumer safety issues. Tariffs would significantly disrupt our companies’ businesses and add significant costs that would depress sales of video game consoles and the games and services that drive the profitability of this market segment.”
According to the letter, if the US increases its tariffs as much as it is proposing, then consumers would end up paying an estimated $840 million more when combined and even when accounting for this result, the U.S. economy would still lose around $350 million for each year the tariffs remain in effect. In the long term, this would cause the major console makers to reduce their investment in new technologies and would ultimately harm innovation.
Microsoft, Sony and Nintendo all say that they “appreciate the Administration's goal of strengthening the protection of IP in China” but video game consoles aren't being targeted by China. According to the three console makers, Chinese-developed and branded video game consoles are almost non-existent and aren't well received by the market over there. In all, the three companies hope that the US government won't end up imposing these tariffs on video game consoles.
KitGuru Says: Microsoft, Sony and Nintendo all target US pricing first and foremost before figuring out how much games and systems should cost elsewhere in the world. With that in mind, changes in the US economy could end up having an unwanted impact in other parts of the world. A number of major tech companies are all speaking out against these new tariffs, which will hopefully lead this proposal to go back to the drawing board to be reconsidered.