The U.S.’ trade war with China might enter a new phase as the Trump administration proposes tariffs of up to 25% for thousands of imported goods. Among them are a number of items related to video games, specifically consoles.
The timing for the proposal is unfortunate as the industry is preparing for the arrival of the next-gen consoles.
The economics behind consoles typically rely on the loss leader strategy. It means that the console manufacturers sell the hardware to retailers at a loss to themselves. The idea is to incentivize customers to buy the consoles at an attractive price. Then, over time, companies break even through game sales and subscriptions.
Imposing 25% tariffs would force companies into mitigating their initial loss. The pricing would inevitably go up, which will likely discourage consumers. This, in turn, might delay the transition to the next-generation consoles.
“Tariffs will hurt the American economy, its industries, and its consumers.”
Entertainment Software Agency, via GameDaly.biz.
The previous wave of 10% tariffs has already affected AMD and Nvidia. Besides video games, the tariffs also target tabletop games and coin-op arcade games.
Hearings on the new tariffs will commence on June 17. New tariffs could come into force as early as June 24, which would have an adverse effect on the video game industry in this fiscal year.