Due to new tariffs, many more physical game discs may “simply not get made”

Pricier hardware?

The effect of the Trump tariffs could also be significant in the market for gaming hardware. Niko Partners analyst Daniel Ahmad estimates that 75 percent of all consoles sold in the US are currently imported from China, which is now subject to a 20 percent tariff on all imported goods (up from a 10 percent tariff implemented last month).

The pricing effects of those tariffs might not be immediate, as console makers work their way through pre-tariff import inventories that are already in the US. But the effects are already being felt in parts of the gaming market, with retailer Newegg blaming tariffs for the rising prices of recent Nvidia graphics cards.

Tariff effects might not be felt equally across console manufacturers, though. Analyst David Gibson noted last month that roughly half of Nintendo Switch consoles are currently produced outside of China, a shift that began during a previous trade war threat in 2019. That could leave Nintendo with some flexibility in shipping non-Chinese-made consoles to the United States tariff-free while saving its Chinese-made consoles for the rest of the world.

Microsoft also began shifting its hardware production away from China starting in 2020 in response to the coronavirus outbreak. But Sony is still reportedly heavily reliant on Chinese console production capacity; Gibson estimates only 30 percent of PlayStation consoles are manufactured outside of China.

While Trump and others in his orbit argue that these tariffs will encourage companies to bring manufacturing and production back to the United States, observers see this as unlikely. “Completely reshoring technology manufacturing operations back to the United States is simply not practically or economically feasible given the scale and complexity of required resources and underlying economic production structure,” the Consumer Technology Association trade group argued in an October report.

There is one possible reprieve for the game industry as a whole. In 2019, Sony, Microsoft, and Nintendo successfully worked together with the CTA to argue for an exemption from that round of tariffs against China. Trump has recently signaled that similar exemptions may be coming for this latest round of import taxes.

“Video games are one of the most popular and beloved forms of entertainment for Americans of all ages,” the Entertainment Software Association said in a statement last month. “Tariffs on video game devices and related products would negatively impact hundreds of millions of Americans and would harm the industry’s significant contributions to the US economy. We look forward to working with the Administration and Congress to find ways to sustain the economic growth supported by our sector.”