In an unprecedented display of solidarity, the world’s leading video game console manufacturers issued a statement against President Donald Trump’s proposed 25 percent tariffs on consoles manufactured in China. Microsoft, Nintendo, and Sony say that the cost will ultimately be passed on to American consumers, and that the proposal would put at risk the jobs of more than 220,000 Americans, including hundreds of small businesses.
At issue is a soon-to-be-finalized list of goods imported from China with tariffs that the Trump administration has tasked the United States trade representative with creating. If video game consoles are added to that list, they would cost the major console manufacturers 25 percent more to import virtually overnight.
The statement echoes similar comments from the Game Manufacturer’s Association (GAMA), a nonprofit organization that represents more than 1,000 companies in the hobby tabletop games industry.
“While we appreciate the Administration’s efforts to protect U.S. intellectual property and preserve U.S. high-tech leadership, the disproportionate harm caused by these tariffs to U.S. consumers and businesses will undermine — not advance — these goals,” reads the statement, which is dated June 17. “Accordingly, we respectfully request that the Administration remove HTSUS subheading 9504.50.00, covering video game consoles, from the final list of tariffs, and thus refrain from applying tariffs on these products.”
Signatories include Linda K. Norman, vice president and deputy general counsel at Microsoft Corporation; Devon Pritchard, general counsel and executive vice president of business affairs at Nintendo of America; and Jennifer Liu, general counsel, senior vice president, legal and business affairs at Sony Interactive Entertainment.
The seven-page document, complete with more than 20 footnotes, is a remarkable window into the efforts of an industry desperately trying to explain itself to the President. In it, the three largest console manufacturers describe how they manufacture and sell game consoles at or near their actual cost of production, and that each device is custom made. Sourcing alternate components and spooling up additional assembly plants in alternate countries is simply not feasible, they say.
The three multibillion-dollar corporations say that while they would likely see fewer sales of their consoles, the small businesses that actually make video games would be damaged the most.
An excerpt from the joint statement:
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.
The letter goes on to state that if the tariff on consoles were to be put in place, it 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 true cost — an estimated $840 million — would be shifted almost entirely to consumers. That end result would likely “put a new video game console out of reach for many American families […] this holiday season.”
The deadline for formal rebuttals to the proposed tariffs was on June 24. No final deadline has been offered from the administration as to when the proposed tariffs will be finalized.