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Tue, 02 Jul 2019
Sony, Microsoft, Nintendo Say Trump Tariffs Will Make Game Consoles Hugely More Expensive
Furnished content.
If you hadn't noticed by now, Trump's efforts to use tariffs to somehow magically improve the country's standing in the world aren't based on much in the way of sound logic or economic theory. And companies who've been forced to reconfigure and relocate their entire supply chains (to countries like Taiwan) to avoid massive penalties are likely to just pass those costs on to American consumers, something said consumers haven't really fully grokked yet. Countless CEOs think the entire gambit is immeasurably stupid, but have been hesitant to be too pointed in their criticism for fear of upsetting administration regulators.As the actual bill comes due however, consumers are likely to wake up from their slumber. Maybe.Case in point: Microsoft, Sony, and Nintendo this week fired off a letter to the Office of the United States Trade Representative, warning the Trump administration's plan to bump Chinese tariffs from 10 to 25 percent will have a profoundly-negative impact on the game industry. With 96 percent of game consoles made in China last year, the act of reconfiguring their entire supply chains will have a massive impact on the sector's bottom line and the numerous connecting companies that tendril out from the big three gaming giants.The letter itself is abundantly clear that it's not these companies that are going to eat these costs, but the American consumer. In fact, the full letter (pdf) leans heavily on data suggesting that the 25 percent hike on game consoles will result in US consumers paying $840 million more on the game hardware than they might have anyway:"A price increase of 25% will likely put a new video game console out of reach for many American families who we expect to be in the market for a console this holiday season. For those purchases that do go forward despite tariffs, consumers would pay $840 million more than they otherwise would have, according to a recent study prepared for the Consumer Technology Association by the independent economic group, Trade Partnership. That study also noted that [e]ven after accounting for new tariff revenue, the result is a net $350 million loss for the U.S. economy for each year the tariffs remain in effect, with the burden carried by U.S. consumers." Hey, neat.Presumably, Trump believes that these threats will ingeniously force China's hands in trade negotiations, though it's not really clear that's actually happening. What's happening instead is a slow accumulation of collateral damage, as countless US companies (like Apple) face new penalties that will slowly chip away at the US economy before it forces China's hand. It will be curious to see what happens when American consumers realize they're the ones footing the bill as we wait for the final outcome of a unilateral US trade gambit that was never likely to actually work.
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posted at: 12:00am on 02-Jul-2019
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