Trump's Tariffs Could Be the Final Boss for Affordable Gaming
As Trump’s trade wars with Canada and China escalate, tariffs could push console prices up, threaten U.S. jobs, and disrupt a $66 billion industry.
Economic and business leaders have been adjusting to President Donald Trump's tariffs at a breakneck pace, making it hard for Americans to track how their lifestyle may change under Trump's economic vision. One lesser-discussed area: video games.
Two-thirds of the nation play video games at least one hour per week, and almost 80 percent of U.S. households own at least one gaming device. These games aren't just an adolescent pursuit either—the average player is 36 years old. Broad tariffs—like the 10 percent tax the Trump administration imposed on China—could produce a price increase of 40 percent for consoles and a 57 percent decrease in purchases.
This has serious implications beyond consumers' access to video games. Depressed console sales could affect more than 350,000 American jobs, approximately $66 billion in America's gross domestic product, and billions of dollars in taxes for federal and local governments.
Luckily, some in the industry prepared for a second Trump administration. In 2019, Nintendo planned to shift its Switch gaming console production to Vietnam to avoid Trump's trade war with China. Six years later, the Japanese company's diversified supply chain is better equipped to handle Trump's second term. Similarly, Microsoft has been shifting its manufacturing operations beyond China for years.
But the tariffs affecting gaming hardware will still hurt, especially since consoles are already a loss leader. Microsoft loses almost $200 on every Xbox it sells. Sony initially sold its PlayStation 5 at a loss, which other products offset.
What are these other products? Subscriptions and digital content, which, thankfully, are resilient to tariffs. Wedbush Securities analyst Michael Pachter told GameSpot that Microsoft and Sony's game downloads would be tariff-free and that Nintendo could obtain a U.S. subsidiary license to sell games for about $1 per unit. That's good news for the software sector jobs that dominate about 73 percent of the video game industry in America.
Still, making consoles even more expensive will put more strain on the industry, likely driving prices up.
Companies might also get exemptions or delays from the White House. On March 5, Trump gave automakers a one-month reprieve from tariffs on Mexico and Canada following a request from Ford, General Motors, and Stellantis. Or remember Apple's $500 billion commitment to the United States? Apple made a similar investment while Trump considered tariffs that would have affected the iPhone. He later discarded those tariffs.
In fact, the video game industry avoided similar tariffs on China in 2020. After Microsoft, Nintendo, and Sony published a joint letter highlighting the industry's importance to the economy, the United States suspended tariffs on consoles temporarily at first, and later, indefinitely.
Tariffs could make gaming an expensive luxury out of reach to most Americans. With two-thirds of Americans playing video games, the ripple effects will be felt far beyond the controller. Trump should refrain from tampering with the market.
