It’s not often that you can have the major powerhouses in the gaming industry working side-by-side with one another, but the 3 giants are standing together against the 25% tariff proposed by the Trump administration against Chinese goods.
Sony, Microsoft, and Nintendo have issued a joint statement opposing the proposed tariff, bringing to light the impact and undue economic harm that the proposed tariffs “would have on the entire video game ecosystem.”
According to the statement which was sent to Joseph Barloon, who is the general counsel to the United States Trade Representative (USTR), the proposed tariff could not “stifle innovation,” but the 25% tariff could result in loss of industry employment, and harm consumers and retail in the process.
The statement warns that a new tax could affect 220,000 US video game jobs at both larger and small businesses.
“Economically, the video game industry contributes substantially to the U.S. economy, and its year-on-year growth is impressive. The U.S. video game industry generated total revenue of $36 billion in 20172 and $43.4 billion in 2018,3 reflecting over 20% in growth. This industry directly and indirectly employs more than 220,000 people. Ninety-nine point seven percent (99.7%) of video game companies qualify as small businesses and can be found in each of the fifty states; 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.”
Furthermore, the statement points out that video gaming consoles are complex to manufacture and are typically sold at low margins, stating that it would be difficult to move production to the United States, or to modify the current supply chain that is in place.
The statement goes on to say that the new loss from new taxes to the United States economy could be around $350 million.
“In 2018, over 96% of video game consoles imported into the United States were made in China.9 The video game console supply chain has developed in China over many years of investment by our companies and our partners. 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. 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.”
Nintendo has already been safeguarding against the potential tariff, and has been moving production to Southeast Asia in an effort to do just that.