Nintendo Sony Microsoft join forces vs US customs taxes: The three console manufacturers wrote a joint letter explaining how these taxes would damage the video game economy, and the US economy in the process. Back on this argument!
For the context, Trump seeks to reduce the US deficit in their trade with China. In particular, it requires greater openness of the Chinese market to their products, stopping the forced transfer of US technology to China, and stopping the theft of intellectual property (by counterfeiting). To obtain these conditions, the president announced a huge increase in taxes on all Chinese imports, including on consoles. Nintendo of America, Sony and Microsoft have sent a letter to the US trade representative: they appreciate the intention to preserve the US intellectual property and high-tech leadership, but they say it is disproportionate for a number of reasons.
Nintendo Sony Microsoft join forces vs US customs taxes
The players first
The three manufacturers sell their consoles with very tight margins to arrive at the most accessible price possible. They are aware that they are aimed at a wide audience, and that people who buy consoles are very sensitive to price, and price changes. The tax would explode the cost of Switch, Xbox and PlayStations, and they will be much less bought. As publishers remind us, video games are at the heart of American culture and entertainment (60% of Americans play video games every day). Not only would it be bad for the players, but it would also be the beginning of a free fall for the industry.
Patatra for the industry
We immediately imagine the negative effect of a big drop in console sales on manufacturers. In fact, it would impact the entire chain: developers, distributors, resellers ... It would put thousands of jobs at risk. In addition, the tax on Chinese products would force manufacturers to use only US products, or from another country than China, which would further increase costs. The production line is complex, each console has components that come from many countries, so I do not tell you the hassle to re-optimize with this economic change. The letter stresses that the innovation sector would also be affected: the JV sector is historically a leader in this field.
A problem for the US too
The gaming industry weighs quite heavily on economic growth in the United States, both through sales and job creation. We have already talked about the negative effect on the production line and on American players. Microsoft, Nintendo and Sony put forward another important argument: the tax is not the solution to eliminate Chinese practices, at least in their field. The consoles are not particularly affected by the counterfeit, nor by the forced transfers of technology. Market leaders have come to the conclusion that this tax would have a disastrous snowball effect. They are asking that the consoles not be included in this measure. The G20 will take place this weekend, and he may be able to suspend this project.