The three major console manufacturers Sony (PS4), Microsoft (Xbox One), and Nintendo (Switch) have jointly informed the US government under President Trump that his trade war with China is causing them difficulties. If tariffs were indeed imposed on imported consoles from China, it would have serious consequences.
What is the problem? The US government under Trump plans to impose 25% tariffs on imports into the US from China. This also affects consoles. Many components of the current generation of consoles from PS4, Xbox One, and Nintendo Switch are manufactured in China.
The next generation PS5 and Xbox Scarlett are likely to be built in China as well, potentially by the Taiwanese mega-company “Foxconn,” which operates factories in southern China.
Therefore, the three hardware giants Microsoft, Nintendo, and Sony have jointly submitted a request to the US Department of Commerce. (via regulations)
In the request, they ask to exempt consoles from the planned tariffs.
96% of imported consoles come from China
What the console manufacturers say: They state that 96% of gaming consoles imported into the US in 2018 came from China.
The production chains in China have been built up over many years with significant investments. Therefore, the hardware in the consoles cannot be easily manufactured elsewhere.
It is said that it would incur significant costs to relocate production to the US or a third country.
These are the consequences envisioned by the three console manufacturers: They say that the increased costs would be felt everywhere. It would affect every company that makes games – both larger and smaller ones.
It would impact companies, customers, and retailers. Many small and medium software developers and accessory suppliers in the US would also feel the effects of the increased costs due to tariffs.
The tariffs would have a ripple effect on the entire ecosystem.
The tariffs:
- would harm customers, video game developers, video game retailers, and console manufacturers
- would cost thousands of high-quality and lucrative jobs in the US
- and would endanger the entire industry with ripple effects
This is the argumentation: The manufacturers appreciate that the US government wants to better protect their intellectual property, but the issue is not about consoles. China does not manufacture consoles itself. And it wouldn’t be worth it for China to plagiarize US consoles.
Furthermore, they emphasize how valuable Nintendo, Microsoft, and Sony are to the US economy, how much they invest here, and how much they contribute to the US economy.
According to Sony, Microsoft, and Nintendo’s argumentation, the tariffs would not bring any advantages, only disadvantages.
Would tariffs also affect us in Europe? It’s not yet clear. Nintendo, Sony, and Microsoft would undoubtedly incur additional costs in the production of PlayStation 5, Xbox Scarlett, and Nintendo Switch.
The question arises whether they would pass these additional costs on only to customers in the US or distribute them worldwide.
It is entirely possible that the US trade dispute could also affect the costs of PS5 and Xbox Scarlett in 2020 in Germany.
Update 30.6.: 15:12: It seems that the protest has had some success for the time being. Trump has indeed halted the tariffs – but only after a meeting with China’s President Xi Jinping.
