An uncertain future for the video game industry: the impact of the customs tariffs proposed by Donald Trump
One of the main topics discussed by Donald Trump, the president-elect of the United States, during the election campaign was that of tariffs. Trump notably mentioned tariff rates of up to 60% or more on products imported from China. Since video game consoles and various accessories are largely manufactured in China, many people wonder about the potential impact of these taxes on consumers.
Concerns are that prices of consoles and video games could rise significantly, as some analysts have predicted. This topic is all the more relevant as the Switch 2 is scheduled for release in 2025, and Rockstar’s highly anticipated Grand Theft Auto VI is also scheduled for next year.
Currently, no definitive answer is available. Some economists believe that introducing tariffs of 60% is unrealistic. Moreover, Trump may not follow this path once installed in January, or even abandon these proposals. To better understand the situation at this early stage, our team consulted with analysts and gathered various opinions on the potential impact of these tariffs on the video game industry.
The repercussions on the video game market
Tariffs are taxes imposed on goods as they pass across national borders. As USC Cornsife recalls, tariffs were implemented in the United States shortly after the ratification of the Constitution, more than two hundred years ago. One of the consequences to be anticipated when introducing new import tariffs is that it is generally consumers who pay for this price increase, with companies seeking to compensate for the loss by increasing prices.
Tu Xinquan, head of the University of International Business and Economics in Beijing, told The Associated Press that “no one” could cope with a 60 percent tariff. If that happened, companies could “completely halt trade with the United States.”
During his first term, Trump has already implemented tariffs on hundreds of billions of dollars of Chinese products. Although this led to a decrease in imports, the situation saw an upswing thereafter. These measures were intended to favor American manufacturing, but experts say it has not borne fruit. President Biden maintained these tariffs and added others, including on steel and electric vehicles. Its new proposals could be even broader, potentially affecting the video game sector.
“There will be a lot more tariffs,” said Michael Stumo, executive director of Coalition for a Prosperous America. Jen Harris, a former White House official working under Biden, warned that a key concern about the proposals is that they could give companies an opportunity to “drive up prices.”
Recently, Trump also noted during an broadcast of NBC’s Meet The Press that his new import taxes could lead to higher prices for consumers. “I can’t guarantee anything. I can’t guarantee tomorrow,” he said when asked whether consumers might pay more if his taxes move forward.
Harmful consequences for the video game industry
The video game industry has been going through a tough time recently, with major publishers cutting costs through game cancellations, layoffs and studio closures. The arrival of new tariffs, while the industry hopes for a recovery in 2025, could pose a problem according to experts.
Piers Harding-Rolls of Ampere Analysis said introducing tariffs on video game-related imports would be bad news for the industry, especially in the current context of market slowdown and budget cuts.
Michael Pachter, an analyst at Wedbush Securities, noted that Microsoft and Sony, having divisions in the United States, would see their game downloads exempt from tariffs. On the other hand, Nintendo could get around this problem by establishing a subsidiary in the United States for its sales rights.
Physical games, although they represent a reduced share of sales, could see their prices soar under the effect of a tax on imports. Circana’s Mat Piscatella warned that this would incentivize publishers to raise prices on digital games to maintain parity, otherwise some might abandon physical media.
Harding-Rolls believes that the console market could be directly affected by these potential taxes, imposing sales delays on new hardware and affecting consumers’ purchasing power for games and related services.
Our point of view
As observers of the video game industry, we must focus our attention on the evolving economic framework surrounding this sector. Tariff proposals, while potential, require careful analysis of their long-term effects on the market. We should not only focus on the immediate consequences of such changes, but also consider how this could redefine consumer behavior and encourage a shift towards alternative distribution models, including cloud gaming. The true potential of this industry lies in its ability to adapt and innovate in the face of economic pressure, while remaining accessible to the general public.
- Source image(s) : www.gamespot.com
- Source : https://www.gamespot.com/articles/will-trumps-tariffs-raise-video-game-and-console-prices-heres-what-we-know/1100-6528381/
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