Tariffs may raise cost of Sony, Microsoft, and Nintendo’s next-gen consoles

Nintendo Switch vs Sony Playstation 4 vs Microsoft Xbox One

The conflict between the U.S. and China has impacted the tech industry, notably impacting the business of Chinese mobile smart device manufacturer Huawei and any companies that deal with it. Now, newly proposed taxes on video game consoles are bringing the issues over to the gaming industry. The Trump administration has proposed $300 billion in tariffs but, as reported by Kotaku, Sony, Microsoft, and Nintendo have made a joint statement opposing the move.

The three companies argue that the tariffs will cause disproportionate harm to business overall and the joint letter specifies three ways that the proposed taxes will harm the video game industry:

  • Injure consumers, video game developers, retailers and console manufacturers;
  • Put thousands of high-value, rewarding U.S. jobs at risk; and
  • Stifle innovation in [the gaming] industry and beyond.

Timing of these tariffs couldn’t come at a worse time for major home gaming companies. We’re on the cusp of a shift into the next generation of home consoles with Sony’s PS5 and Microsoft’s Project Scarlett due sometime in FY 2020. These additional taxes could stifle the early and overall adoption by raising the cost significantly. Not just focusing on the consoles that Sony, Microsoft, and Nintendo produce, the letter points out small and medium-sized software developers in America will be harmed.

The original product list in the proposal from the administration mentions video games, gaming controllers, arcade machines, and even board games. The letter doesn’t make an argument for Trump’s administration to completely stop the tariffs or even to remove all mentions of games, but to remove a specific subheading that covers video game consoles. The specified subheading is 9504.50.00 and it lists “Video game consoles and machines, other than those of heading 9504.30.” Subheading 9504.30 covers coin or token-operated games for arcade, table, or parlor.

There’s no telling when the tariffs go might into effect, but the original report suggests that progress could be made at the upcoming summit taking place in Japan this weekend, June 29 and 30. While the seven page letter makes a lengthy argument for removal of that subheading, even explaining how the tariffs wouldn’t be effective in this fight against China, it isn’t likely that gaming will be getting special treatment. The hope is that the subheadings for video games would be removed along with others in a massive modification of the proposal, or that the conversation between the U.S. and China improves enough that the entire proposal is scrubbed.

You can read the full text of the letter here.

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