In mid-2019, then-President Donald Trump threatened to extend existing tariffs on industrial components and other goods to popular consumer products like iPhones, laptops, and video game consoles. The big three—Microsoft, Sony, and Nintendo, long-time competitors in the gaming space—rallied together to try and fend off the incoming import taxes.
“A price increase of 25 percent will likely put a new video game console out of reach for many American families who we expect to be in the market for a console this holiday season,” the companies wrote in a joint public letter on June 18, 2019. “For those purchases that do go forward despite tariffs, consumers would pay $840 million more than they otherwise would have…”
It worked. Pressure from major companies, including tech giants like Apple and other electronics makers, forced Trump into delaying the tariffs’ implementation and eventually granting exceptions for popular consumer devices altogether. No 25 percent tax on the the Nintendo Switch that Christmas. The PlayStation 5 and Xbox Series X/S launched the following year to pandemic-driven shortages rather than tariff-led price hikes. The video game industry moved forward.
But four years later, Trump has won re-election on a promise to impose even higher tariffs on everything Americans buy. That includes a proposed 60 percent import tax on anything assembled in China and a 10-20 percent import tax on anything else made outside the U.S. On November 25, the president-elect promised that new tariffs on goods from China as well as Mexico and Canada would be a day-one priority. The goal is to raise tax revenue while boosting well-paying jobs in the U.S. A joint study published earlier this year by academics at MIT, Harvard, and elsewhere concluded that the impact of recent tariffs on employment was minimal. No one thinks gaming consoles will start being manufactured in the U.S. any time soon.
No mid-gen price cut in sight
Some industry observers and experts think an emboldened Trump is less likely to retreat this time around. “I think companies have been taking it very seriously this time,” Mary Lovely, economics professor at Syracuse University’s Maxwell School of Citizenship and Public Affairs, told Kotaku in a phone interview. She worries that even if Trump starts with a lower opening bid than a 60 percent tariff on China, there’s potential for a reignited trade war to quickly escalate out of control. “That’s what he’s threatening, that’s what we could face.”
Tariffs are taxes imposed on goods imported into the country. They’re levied against the companies bringing the products in the U.S., but are often passed onto consumers in the form of higher prices. The changes aren’t one-to-one. A 60 percent tariff doesn’t necessarily mean a PS5 or Xbox Series X made in China will suddenly cost $800 at Walmart or Best Buy. But experts tend to agree that the majority of the tax will hit customers’ pocketbooks instead of companies’ bottom lines. Walmart, Best Buy, and other stores are already saying the results would still lead to dramatic price increases compared to what people are paying now.
The Consumer Technology Association (CTA), a trade group representing hundreds of companies that would be impacted by the tariffs, released a report in October claiming that roughly 40 percent of the costs of tariffs would be passed onto consumers when it comes to gaming consoles and related products. “American consumers would pay $7 billion more for video game consoles,” the report claims. “As a result,” it goes on to forecast, “U.S. consumers reduce overall purchases by 57 percent.” Accessories and related products, from charging cables to TVs, would also get more expensive.
“The model we used assumes that suppliers pass all extra costs of the tariffs onto consumers,” Richard Kowalski, CTA’s Senior Director of Business Intelligence, told Kotaku in an email. “The model also assumes that the tariffs incentivize some alternative sourcing. But given the limited amount of alternative sources available, most game consoles would still come from China.”
A Switch would go from $300 to over $400. A PS5 Pro would go from $700 to nearly $1,000. Nvidia graphics cards for building gaming PCs would see similar spikes, as would the growing line of PC gaming handhelds like the Steam Deck and Asus Rog Ally. The Switch 2, expected to arrive as early as March 2025, could see its year-one sales torpedoed by the sudden sticker shock of a hybrid console almost twice as expensive in the U.S. as its predecessor.
Nintendo is one gaming company that’s already started moving some manufacturing out of China and into neighboring Vietnam. David Gibson, Senior Analyst at MST Financial, estimates that roughly 50 percent of Switches are made outside of China this point, but he still foresees prices going up by as much as 35 percent if the current proposed tariffs go into effect.
Alternatively, Nintendo could try to reserve its Switch stock made outside of China for the U.S. market, which makes up roughly 40 percent of the global console market. He also estimates that PS5 manufacturing is closer to 70 percent in China and 30 percent in Japan and elsewhere, meaning costs would rise even more for Sony’s hardware. Microsoft’s Xbox, on the other hands, already has a much more diversified manufacturing base, in addition to the fact that the company has spent much of 2024 downplaying the significance of selling new consoles.
How would companies respond in the meantime? Gibson suggests Nintendo, Sony and others will look to increase imports ahead of Trump being sworn in on January 20 and begin shifting even more manufacturing capacity to other countries like India. “I would expect a full shift to non-China production within 12-24 months of the news,” he wrote in an email to Kotaku. “[It] usually takes 6 months to put in equipment and longer to find or build facilities.” By that point, the costs could be closer to 10 percent above what they are now, and companies like Sony might look to absorb more of them in a hit to profit margins to continue growing the PS5 install base. Lovely, however, suggested other countries aren’t ready to absorb that demand. “India’s just not ready,” she said.
Tariffs could radically alter gaming’s trajectory
But higher hardware costs are just the start of how tariffs could reshape gaming in the U.S. Joost Van Dreunen, a lecturer at the NYU Stern School of Business, believes the most draconian tariffs would dramatically reshape the console landscape in the years ahead. “The data indicate that tariffs would not just affect sales volumes but could permanently alter the console industry’s role in U.S. gaming culture,” he wrote in a recent edition of his Super Joost Playlist newsletter. In the worst-case scenario, he estimates that total console sales in the U.S. would fall below early 2000s levels “despite two decades of market expansion and a substantially larger gaming population.”
One likely outcome of this scenario, Van Dreunen speculates, is that players in the U.S. start moving toward other ways of accessing games. “These tariffs could fast-track the industry’s shift toward cloud gaming, streaming services, and transmedia distribution, marking a classic transition from content innovation to distribution innovation in the pendulum cycle,” he wrote.
Physical games would also potentially die off even faster as players switch to tariff-exempt digital downloads and cheaper, digital-only versions of the existing PlayStation and Xbox consoles. Or as Mat Piscatella, Executive Director & Video Game Industry Analyst at Circana, recently speculated, companies could actually raise the price of digital games to compensate for the rising MSRPs on physical store shelves.
That’s to say nothing of all of the publishers, game studios, and related businesses that rely on players spending hundreds of dollars each year on new releases, battle passes, and subscriptions. The last two years have already seen dramatic cutbacks to companies big and small due to interest rate hikes and a retreat of the pandemic-era boom. Tariffs would effectively siphon off even more player spending away from games and the people who make them at a time when some analysts argue the video game industry is already lagging behind previous growth forecasts.
“If the campaign promises are fulfilled, I expect console prices to rise and subsequently a decline in sales,” Chris Clarke, an economist at Washington State University, wrote in an email to Kotaku. “The United States currently produces around 1 percent of consoles. Even if these tariffs are phased in, these costs will all be passed to consumers as there are no other equivalently priced options…while production may increase in the U.S., it will only do so at a higher consumer price relative to today. In the end, U.S. gamers will bear the burden of these taxes.”
Of course, all of this hinges on what actually happens in the next six months. If history’s any indication, Trump could threaten major tariffs only to back off of them in return for minor trading concessions from other countries, declaring victory despite minimal changes to the status quo. Big tech and gaming companies could also once again successfully lobby the incoming administration for exclusions from the highest tariff rates as they did back in 2019. That’s no doubt part of why several CEOs, including Microsoft’s Satya Nadella, recently rushed to congratulate Trump on his electoral win.
Or, the president-elect could simply make good on one of his biggest campaign promises and spur a new wave of gaming price hikes after companies already raised prices following post-pandemic inflation. “If these tariffs go into effect, gamers can expect to pay significantly more for their next game console (as well as other products!),” the CTA’s Richard Kowalski wrote in an email to Kotaku. “Tariffs are taxes paid for by U.S. consumers and businesses, and they stifle innovation as companies divert scarce resources to tariff payments, not hiring American talent to work on cutting-edge technologies.”
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