Sony, Microsoft, and Nintendo have joined forces to tell the U.S. government that its newly-proposed tariffs on goods imported from China would hurt consumers, put jobs at risk, and stifle innovation, according to a joint letter sent by the companies to the Office of the U.S. Trade Representative.
As part of its ongoing trade war with China, the Trump administration has proposed $US300 ($429) billion in tariffs, or taxes on foreign goods, on most consumer goods. This would include a 25 per cent tariff on video game consoles. “For those purchases that do go forward despite tariffs, consumers would pay $US840 ($1,202) million more than they otherwise would have,” the console manufacturers argue, citing a report by the Trade Partnership Worldwide economic group.
In the joint letter dated June 17, the companies say that 96 per cent of video game consoles imported by the U.S. are manufactured in China and that due to the custom hardware inside of them, they can’t easily be made elsewhere.
“The video game console supply chain has developed in China over many years of investment by our companies and our partners,” the companies say. “It would cause significant supply chain disruption to shift sourcing entirely to the United States or a third country, and it would increase costs—even beyond the cost of the proposed tariffs—on products that are already manufactured under tight margin conditions.”
They go on:
“Each video game console comprises dozens of complex components sourced from multiple countries. A change in even a single supplier must be vetted carefully to mitigate risks of product quality, unreliability and consumer safety issues. Tariffs would significantly disrupt our companies’ businesses and add significant costs that would depress sales of video game consoles and the games and services that drive the profitability of this market segment.”
The companies don’t speculate what the 25 per cent tariff would do the the prices that consumers will pay at the cash register, but they do argue that the effects of the increased costs would be felt throughout the industry, including by companies both big and small who make games.
“Because of the deep interdependence of video game consoles and game software, and due to the price sensitivity of video game console purchasers, tariffs on video game consoles would not only harm our companies, consumers, and retailers, but will also disproportionately harm the thousands of small and medium-sized software and accessory developers in the United States,” the companies say. “Thus, these tariffs would have a ripple effect of harm that extends throughout the video game ecosystem.”
It’s still not completely clear if and when the new round of tariffs will go into effect in the United States. Trade talks between the U.S. and China are currently ongoing, and yesterday Bloomberg reported that the new tariffs could be suspended from going into effect if progress is made at the Group of 20 summit taking place in Osaka, Japan this weekend.