Representatives from Microsoft, Nintendo, and Sony have penned a joint letter of opposition to the Trump administration’s proposed 25 percent tariff on video game consoles imported from China. The letter, addressed to the Office of the United States Trade Representative, lays out the case for why these tariffs would do more harm than good to the American economy.
Video game consoles aren’t being specifically targeted by the administration. Instead, the potential new fees on consoles are part of a sweeping proposal that would levy tariffs on nearly 4,000 new product categories - essentially every product not already being taxed in the ongoing trade dispute with China. According to the Office of the United States Trade Representative, the products under consideration for new tariffs account for $300 billion in trade.
Targeted or not, the tariffs would hit video game consoles hard, as a 25 percent increase on already pricey goods would drive them out of the budget of many potential customers. That’s just one point raised by the letter from the big three console manufacturers, which can be read on Regulations.gov. According to the letter, those who did buy new consoles would pay a total of $840 million more than they would have without the tariffs, but that would still cost the economy $350 million due to the number of people who couldn’t afford to make a purchase at all.
The signers of the letter write at length about how the worst effects of the tariffs would be felt by others less able to withstand the harm than the console manufacturers themselves. In addition to the loss to consumers, game developers would suffer from having a smaller pool of potential customers. That would not only further damage the economy, by shrinking sales of games, but it could also harm individual workers within those companies. The letter states that there were over 65,000 people working for video game developers and publishers in 2018 whose jobs could be at risk if game sales fall. As we’ve seen several times this year alone, mass layoffs plague the video game industry even when companies are thriving. If sales were to fall across the board, the loss of jobs could be truly devastating.
Aside from its intended purpose of pleading with the administration not to drag the video game industry into its trade war, the letter actually makes for some interesting - albeit a bit dry - reading about the state of the industry. It’s rare to see executives explain their businesses in such plain terms, and it makes details of console supply chains and the structure of the industry easy to understand, complete with footnotes for those who are really motivated to dig in further.