Well kids dig in and get your calculators out because we’re going to be discussing economics, foreign trade, and tariffs. However, I want to stress that this isn’t a political piece, we’re not taking sides in this debate, we’re just analyzing the proposed tariffs by President Trump and how they could affect video games, that’s it.
So to catch you up, President Trump wants to revisit America’s trade agreements with our trading partners and one of those things Trump wants to bring to the table is a 10% trade tariff. A tariff is basically a tax on foreign goods, it’s something that has been used since before colonial times for the government to make money off of goods coming into the country and to promote citizens to purchase goods made in the home country.
So Trump wants a 10% tariff on imported goods so if we take this on a whole that means games coming from Japan and Europe (say Witcher and Final Fantasy) would cost an extra $6, which in the grand scheme of things really isn’t that much, but I understand for some of you reading this an extra $6 is a bit much not to mention it can add up over time. However, this wouldn’t affect all games, games such as Madden, Battlefield, Call of Duty, and other games made in the US would still be $60 since they wouldn’t have to deal with the tariffs.
With US based games being only $60 the question is would Japan game makers eat the coast of the tariff in order not to lose sales to US game makers, after all the US market is still the biggest market for video games so losing a percentage of your sales in the US by charging $6 more for games than US makers could hurt the game makers. For instance if a new Fallout game and a new Final Fantasy game were released at a similar time, Fallout being made in the US selling for $60 and Final Fantasy being made in Japan would sell for $66, since they’re both forms of RPGs gamers might decide to spend their money on the game that is $6 cheaper. Because the price increase would only affect some of the gaming industry and not all of it eating the $6 for foreign game makers might actually be cheaper than a loss of sales.
Also what could affect a possible price hike in foreign games is the same thing that has kept games at $60 for decades and that’s the used game market. If a gamer doesn’t want to pay an extra $6 for a new game then they can probably wait a week or two and get a used copy from Gamestop to combat the cost. As we’ve seen time and time again the used market is the bane of the video game industry and if studies show that enough gamers are buying foreign games used than new then this could force game makers to eat that $6.
Also foreign game makers could subvert the tariff by manufacturing their games here in the US. Most major video game companies have offices and major representation in the US, it could be possible for them to set up manufacturing plants in the US instead of shipping them to the US. A Mario game that is manufactured in the US would not be charged a tariff. So Nintendo could just deliver the code to Nintendo of America and have them produce the cartridges and the wouldn’t have to pay the tariff on the game, this is what foreign automakers do to avoid paying tariffs on cars. Toyota, BMW, and Honda all have factories in the US and many of their cars that are sold in the US are built in the US.
As far as buying digital, I tried to find information on whether tariffs affect digital goods like music, movies, and games and couldn’t find anything on that (probably because the idea of buying digital is fairly new and not much legislative thought has gone into it) but since a digital good is not a manufactured product like a disc or cartridge I assume it wouldn’t be taxed like a physical copy. However, as we’ve seen with console games, the game publishers charge the same price for a digital game as they do for a physical copy, even though distributing the digital copy is cheaper for the publisher, so Zelda or Final Fantasy is $66 at Best Buy it might be $66 in the digital stores as well, even though it might not be subjected to the 10% tariff.
Also, a negative outcome to the tariff is that all games will go up, even US made games. If EA (and this would be an EA move) sees that Japanese games are selling well at $66 they might raise their prices from $61 to $66 to make more of a profit. This obviously wouldn’t go over too well with consumers, but given they have exclusive rights to the NFL, Star Wars, and FIFA consumers who want to play those licenses will have no choice but to pay what EA is asking.
I’ve only touched on games here, a 10% tariff on games might not be too hard for a company to swallow to stay competitive, however a new console, that’s different. Ranging from $300 (for the Switch) to $400 (PS4 Pro) that 10% adds up so I don’t see Sony or Nintendo eating that cost (get your PS4 Pro and Switch now people!). Those could easily see a price hike because of the tariffs, this could also affect any Xbox Ones made outside of the US. However, we’ve seen Sony and Microsoft time and time again sell a system for less than the cost of manufacturing it, and with this current gen well underway the cost of making systems for both companies have gone way down and them eating the cost of the tariff to get more systems into homes might again be cost effective for them (especially for Sony if the Xbox One isn’t affected by the tariff) so they can sell you more software and online services (which is where they make their real money).
So in the end Trumps proposed tariffs might not affect games at all, at least when it comes to the price of the software. Of course this is one outcome. Economics is a funny thing and the way the market affects prices comes and goes in waves (gas and produce prices are the best example of this) depending on the supply and demand for the products. If consumers won’t pay an extra $6 for a game than publishers will either have to eat the cost of the tariff or find ways around it.
So what do you think about the possibility of tariffs affecting the cost of games you buy in the US? Would you pay an extra $6 for games, would that extra money make you cut back on the total number of games you buy? Would it make you buy more used games? Let us know in the comments below.