Sony, Microsoft, Nintendo Say Trump Tariffs Will Make Game Consoles Hugely More Expensive

from the Big-Old-Derp dept

If you hadn’t noticed by now, Trump’s efforts to use tariffs to somehow magically improve the country’s standing in the world aren’t based on much in the way of sound logic or economic theory. And companies who’ve been forced to reconfigure and relocate their entire supply chains (to countries like Taiwan) to avoid massive penalties are likely to just pass those costs on to American consumers, something said consumers haven’t really fully grokked yet. Countless CEOs think the entire gambit is immeasurably stupid, but have been hesitant to be too pointed in their criticism for fear of upsetting administration regulators.

As the actual bill comes due however, consumers are likely to wake up from their slumber. Maybe.

Case in point: Microsoft, Sony, and Nintendo this week fired off a letter to the Office of the United States Trade Representative, warning the Trump administration’s plan to bump Chinese tariffs from 10 to 25 percent will have a profoundly-negative impact on the game industry. With 96 percent of game consoles made in China last year, the act of reconfiguring their entire supply chains will have a massive impact on the sector’s bottom line and the numerous connecting companies that tendril out from the big three gaming giants.

The letter itself is abundantly clear that it’s not these companies that are going to eat these costs, but the American consumer. In fact, the full letter (pdf) leans heavily on data suggesting that the 25 percent hike on game consoles will result in US consumers paying $840 million more on the game hardware than they might have anyway:

“A price increase of 25% will likely put a new video game console out of reach for many American families who we expect to be in the market for a console this holiday season. For those purchases that do go forward despite tariffs, consumers would pay $840 million more than they otherwise would have, according to a recent study prepared for the Consumer Technology Association by the independent economic group, Trade Partnership. That study also noted that ?[e]ven after accounting for new tariff revenue, the result is a net $350 million loss for the U.S. economy for each year the tariffs remain in effect, with the burden carried by U.S. consumers.”

Hey, neat.

Presumably, Trump believes that these threats will ingeniously force China’s hands in trade negotiations, though it’s not really clear that’s actually happening. What’s happening instead is a slow accumulation of collateral damage, as countless US companies (like Apple) face new penalties that will slowly chip away at the US economy before it forces China’s hand. It will be curious to see what happens when American consumers realize they’re the ones footing the bill as we wait for the final outcome of a unilateral US trade gambit that was never likely to actually work.

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Companies: microsoft, nintendo, sony

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Comments on “Sony, Microsoft, Nintendo Say Trump Tariffs Will Make Game Consoles Hugely More Expensive”

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43 Comments
Anonymous Coward says:

With 96 percent of game consoles made in China last year, the act of reconfiguring their entire supply chains will have a massive impact on the sector’s bottom line and the numerous connecting companies that tendril out from the big three gaming giants.

As a lifelong gamer let me just say "meh". Who cares? Seriously. I think the world can wait a year or two for the latest console with built-in fellatio devices while the industry tackles "reconfiguring their entire supply chains".

The whole game industry needs a wake-up call anyway, especially the Big 3.

Agammamon says:

Aren’t they already selling these things as a loss-leader? Where the money coming in is coming in from game licensing fees, that damn ‘internet tax’ they slap on by forcing you to go through their online services platform (ISP’s ain’t got nothing on the consoles for ripping off customers by locking things down), and taking a cut of ‘microtransaction’ in console games?

I’m against tariffs – unilateral free trade is better than ‘trade managed bay ‘Top Men" – but I’m not buying this one.

Thad (profile) says:

Re: Re:

Nintendo doesn’t sell hardware at a loss and never has.

As for Sony and Microsoft, while it’s true that they sell hardware at a loss (at least, at launch; hardware costs tend to come down over time), just because you sell hardware at a loss doesn’t mean that tariffs won’t increase prices. They may not be willing to take a significantly bigger hit on hardware than they currently do.

tom (profile) says:

If I understand tariffs correctly, they are based on the price paid to the manufacturer not the eventual retail price. So that 25% tariff could result in a much smaller percent increase in the retail price.

And yes, in most cases, the end purchaser will pay the tariff, just as they pay for all the other costs like taxes, safety fees, transport surcharges, etc.

Anonymous Coward says:

Re: Re:

Tariffs were how the Federal Government used to pay for its self. I know we are long past that point as the Government wants more and more. But being screwed over by China for YEARS and us just taking it, doesn’t seem right.

What should we do? Continue to just do nothing? How would go about to stop China from screwing us over? Go to WAR? I know some people seem to be warmongers. That was what they were calling Trump before he was elected, but now that he didn’t go start something up with Iran, and is trying to bring about peace in North Koria, People are all against that. He can’t win no matter what he does. It’s just Orange man bad. Which sounds kind of racist.

Tariffs are really the only option Trump has. They would disappear the minute China agreed with the terms. You know what, it has worked with Mexico!!!

I have no problem buying less China made garbage. Because of such an unfair trade balance, this hurts China far, far more than the U.S. The longer China holds out, the more damaging it is to them. It may already be too late. Companies are now looking at other options outside of China. It won’t happen overnight. It didn’t happen to China overnight. But as companies look to other countries to produce their products, that has a negative effect on China. That is less money for them. MONEY is always what everything is about. As business leaves China, China loses. The U.S. will get products made for cheap in other countries. Some may move back to the U.S., but I’m sure most will just go someplace else. As their middle class grows in those countries, we’ll have products they they’ll want to buy from us.

Really, I look at this as a transitional phase. The longer China holds out, the worse for them. There are places outside of China already that products could be made for the U.S. market to get around the tariffs, and for everyone else in the world, those products can continue to be made in China. I’m not really worried about it.

Some companies will eat the cost of the tariff, and so the product won’t cost you any more, but their profit margins will drop. They’re hoping it won’t last too, too long. Others will eat part of the costs and the rest you’ll be paying. Some others, you’ll just pay the full cost of the tariff. It is what it is.

Anonymous Coward says:

Re: Re: Re:2 We all have to sacrafice... I say the top/bottom 5

So we eliminate the top and bottom 5 (people, not %) from the population, and re-distribute those 10 people’s wealth to everyone else in the rest of the world equally…

Sounds fair, I mean only a small fraction of the population would object (way less than the 1%ers), while the vast majority of the population would benefit, with MONEY no less….

Anonymous Coward says:

Re: Re: Re: Re:

That option is not mutually exclusive with tariffs on China.

Trump is a self-absorbed moron but he’s done one thing right, imo, and that’s imposing tariffs on China. I don’t completely agree with his reasons for doing so but that’s not important. If the tariffs remain long enough we may actually see some positive effect from this.

Of course he totally screwed the pooch with his "tax cuts". We need tax reduction but with a plan that benefits actual working people instead of the ultra-rich. We won’t see the orangutan signing anything like that.

Anonymous Coward says:

Re: Re: Re: Re:

I understand the intention but how is that fair? Barring people who cheated or used really dirty/shady business practices to make that much money, why should someone be taxed more just because they managed to work hard and turn a big profit? And what impact would that have on advances in technology and the economy?

For example, say we taxed the wealthiest Americans at a much higher rate, this would include people like Elon Musk, Jeff Bezos, and others who are currently using their massive wealth to pioneer/revolutionize space flight. If they don’t have that extra to spend on projects like this, SpaceX and others wouldn’t exist and probably never would because nobody would ever have the money to do this. Not to mention that without SpaceX, we wouldn’t be looking at a potential worldwide satellite ISP that could possibly compete with terrestrial broadband.

Also, why even try? If you know that the more money you make, the more you’re going to be taxed, why try to make a lot of money at all? Why not just put in the minimum effort since working harder is barely going to get you further along than working less hard?

I really do understand wanting to spread some of that wealth around, but I can’t get past the fact that this seems like something similar to suing Google/Facebook/Twitter for being "responsible/liable" for bad reviews or terrorist attacks.

And note I’m not saying they should be taxed less, just a straight percentage for all. For instance, let’s say the average tax rate for your average American is 33% (I know it is for me). 33% of $50,000 a year is fewer dollars than 33% of $1 million a year. Instead of higher rates for wealthier Americans, why not just make a flat rate?

Anonymous Coward says:

Re: Re: Re:

It is also possible this will finally spur the change over to fully robotic manufacturing here in the US. We need to build more things here anyway. Paying other countries to make them cheaper than is environmentally sustainable here, just puts the pollution in another country. It is still the same planet though.

Then we will see extra fees added to pay for the massive unemployment that the increase in manufacturing will create.

Anonymous Coward says:

Re: Re: Re: Re:

Then we will see extra fees added to pay for the massive unemployment that the increase in manufacturing will create.

And where will that money come from, and with what conditions, when everybody bar the factory owners are unemployed? Also, who will buy those goods where nearly everybody is unemployed, as they will have no money to buy the goods.

Anonymous Coward says:

Re: Re: Re:

trying to bring about peace in North Koria

By appealing to Kim’s tyrant side since he’s just as keen on dictatorship and got one testing facility shut down… which resumed after the first round of talks? Whatever floats your boat and counts as an achievement, I guess.

Seriously, you think pissing off North Korea’s biggest ally in China is the smart move?

Anonymous Coward says:

Re: Re: Re:

How would go about to stop China from screwing us over?

Prove that they are.

You know what, it has worked with Mexico!!!

No, it didn’t. They were already in talks to fix the problem and would have happened with or without the threat of tariffs. Trump just pulled that at the last minute to make it look like he was getting things done and being a tough guy.

I have no problem buying less China made garbage.

Then you really don’t understand the issue since most American products are either made directly in China or source Chinese made components. This includes quality American products like iphones and other smartphones, pretty much every computer/laptop, board games, clothing, some food items, etc…. Not to mention the very HIGH QUALITY gaming consoles mentioned in this article. Such as Microsoft’s Xbox, an American company product.

Just because it doesn’t have Mandarin symbols on it and isn’t sold and marketed by an obviously China based company, doesn’t mean it or its components weren’t made in China or some other foreign country. You would be hard pressed to find anything produced/sold in America that didn’t have some of it’s production or component supply sourced from foreign countries.

America can’t produce everything within it’s own borders. There are materials that just aren’t physically available in the American physical geography to produce everything here. Stuff has to be sourced from other countries. Sometimes it even makes more sense to produce it in those foreign countries because the logistics of shipping the raw materials/components across the ocean just aren’t worth it.

This is why tariffs and trade wars are no longer viable ideas, except in rare circumstances. The world has moved into an era where trade and production are global, it’s impossible to go back to a time when a country could be completely self-sufficient, if there even was such a time. If a country were to try, they would immediately start to lag behind all the other major countries. Medicine would be in short supply, technology would stagnate, shortages of goods would be rampant; all because of the sole fact that countries have limited and differing resources. What can be produced in one country, can’t in another.

I suggest doing some research on American production supply lines, finite/limited resources, global trade, and maybe take a world economics class before continuing to talk about something you really don’t understand.

cattress (profile) says:

Re: Re: Re: Re:

Thank you for some good sense!

Might I add that while AC might not care if he can get cheap stuff from China, many of us who live on a limited budget do. Access to these less expensive products improves the low and middle class standards of living. We can afford smartphones, big screen TVs, laptops and so much more. Things don’t buy happiness, but these things can certainly facilitate it.

I can’t stand to hear the crying over lost manufacturing jobs, whether it’s to other nations or technology. The previous generations that made their living in factories wanted better for their kids, that’s why they sent them to college and prioritized education. They didn’t want their kids to work in the same dangerous and physically taxing jobs in factories. We have become a nation that produces services rather than objects. We need to change how we train and educate our workforce so that we reduce the chance that people are left behind when some sort of disruption, like creative destruction, occurs. We need to assume that people will need to grow their skill set multiple times over their lifetime.

China isn’t hurting the US. Americans don’t have any rights to jobs or factories from any private business (and our taxes should not be buying these rights either). So what if China, or any nation subsidizes an industry? Like we don’t do that here, which we generally shouldn’t. Seriously, if goods and services (and people) are crossing borders, then bullets and bombs won’t be.

UniKyrn (profile) says:

Too bad, so sad

So you might have to release your games on PC’s instead of your restricted hardware? Oh, my, so NOT sorry for you.

There are $X in the market for games. You want to be stupid with platform restrictions? The market for that, older gamer’s who remember those platforms, they AREN’T the future being defined by young players these days.

Agammamon says:

Re: Re: Too bad, so sad

Well, surprisingly little.

A lot of hardware is recycled from build to build. Unless you’re buying an OEM pre-built. A lot of the components are manufactured in Taiwan or Korea so no trade-war stuff there. Things like cases are so inexpensive now you could slap a 50% tariff and not see the demand curve shift.

Anonymous Coward says:

Re: What Tariffs are they talking about?

If China is going to throw Tariffs on American products going to China, I think it’s only fair to return the favor.

Tariffs were how the Federal Government in the past paid it’s operating costs. This tariff war really only hurts China. As businesses see that maybe they shouldn’t put all their eggs in 1 basket, they’ll start looking for 2nd, maybe 3rd options. A few jobs will come back to this country, but I’m sure most will go to a lot of other countries. That’s great!!! That will actually help build a middle class in those countries, just like it did in China. That middle class, in turn, will buy American made goods.

China used to be pretty much small family farms. Most of them POOR. Working long hours. Capitalism, well a small part of it, at least when it comes to buisness happened with their own Industrial Revolution, just like the U.S. I would love to see that happen in a number of other countries.

Anonymous Coward says:

Re: Re: What Tariffs are they talking about?

A few jobs will come back to this country, but I’m sure most will go to a lot of other countries. That’s great!!! That will actually help build a middle class in those countries, just like it did in China. That middle class, in turn, will buy American made goods.

Only if the goods are made in America, which is what the tariffs are trying to achieve.

Anonymous Coward says:

Re: Re: Re: What Tariffs are they talking about?

Even if they are made in the US. It won’t lead to more Jobs in the US. There will be a handful of people to run the factory most will be run by automation. If you are going to invest billions to move your entire infrastructure. You will invest in as much as possible to have as little employees as possible. In fact, I would actually expect that forcing companies to move back would spur on the production of automation.

Thad (profile) says:

Re: Wondering

Is this sort of the reverse of outsourcing to China? We would start to pay what it would cost to produce goods and services in the US?

That’s the idea, yes. The theory behind imposing tariffs on China is that they’ll make Chinese goods as expensive as US goods, and thus remove the incentive to manufacture in China, and bring those manufacturing jobs back to America.

I suppose Indonesia will sell us cheap crap.

Ah. I see you’ve spotted the flaw in Trump’s plan.

Koby (profile) says:

Standard of Living

The standard of living has dropped for most Americans over the past few decades, as income for ordinary workers has fallen, and not kept up with inflation. It’s very important that this trend reverses. For example, if your paycheck increases by 50% over the next 10 years, then you would be more than willing to pay an extra 25% increase in price. Conversely, it wouldn’t matter if console prices are 25% cheaper if you work at a subsistence level that can barely afford housing and food.

David says:

Well, tax breaks for the rich have to be paid by someone

The people relying mostly on "made in China" because they don’t have the money for stuff produced at home are in the not so wealthy class. Putting tariffs on produces "made in China" hits American consumers for the benefit of American manufacturers. It’s just another scheme for "trickle up economics", stealing from the poor in order to benefit the rich. Only that you get a bit of nationalist propaganda on top to make the turd go down better.

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