No good news for gamers from the elf on store shelves. Tariffs on imports from China could price one-fourth of U.S. families out of the market to buy a video game system this holiday season, game console makers say.
Microsoft, Nintendo and Sony, in a letter to the U.S. Trade Representative’s Office dated June 17, wrote that tariffs could price an Xbox, Switch or PlayStation “out of reach for many American families.”
Those shoppers who do buy a new game system will collectively pay $840 million more this holiday season than they would have had tariffs not been imposed, the companies say, citing a study from the independent economic group Trade Partnership for the Consumer Technology Association.
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In a rare joint letter, first reported on by Vice, the three video game hardware makers ask the Trump administration to remove video game consoles – 96% of those imported were manufactured in China – from the final list of products to be hit with tariffs.
The Trump administration has imposed 25% tariffs on $250 billion in Chinese imports and plans to expand that to an additional $300 billion in imports. China, which the U.S. has accused of stealing trade secrets and forcing technology sharing for deals, has responded with tariffs of its own on U.S. goods.
But the video game companies say, “although we appreciate the Administration’s goal of strengthening the protection of IP in China, video game consoles” are unlikely to be targets of counterfeiting.
Instead, they say tariffs on game systems would stifle innovation, “injure consumers, video game developers, retailers and console manufacturers” and “put thousands of high-value, rewarding U.S. jobs at risk.”
Microsoft, Nintendo and Sony employ nearly 8,000 in the U.S. and collectively sold more than 15 million game systems in 2018. Overall, the U.S. video game industry generated total revenue of $43.4 billion in 2018, a 20% increase over 2017.
But the three video game giants note in the letter that the U.S. video game industry “directly and indirectly employs more than 220,000 people” and that most game companies are small businesses. “Many develop software for video games across the range of platforms, from PCs to mobile, including the video game consoles that we manufacture, and are an integral part of the booming app economy,” they say.
However, game consoles are made in China, thanks to a supply chain that has been developed “over many years of investment by our companies and our partners,” they 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.”
Tariffs on game systems 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 effect would carry over to more than 2,700 game software and development companies, and retailers such as Best Buy, GameStop and Walmart, they say.
“Thus, these tariffs would have a ripple effect of harm that extends throughout the video game ecosystem,” they say in the letter.
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Follow USA TODAY reporter Mike Snider on Twitter: @MikeSnider.