President Trump proposes import tax on gaming consoles due to China trade war

By Asher Madan
published

The trade war rages on.

What you need to know

  • China and the United States are currently engaged in a trade war.
  • President Trump has proposed a 25 percent import tax on consoles.
  • The existing import tax is only 10 percent.
  • Discussions are still taking place to avoid this.

Currently, there's a trade war going on between China and the United States. Both countries keep on raising tariffs on imported goods, which means that the cost of certain items will rise by another 15 percent or more. According to a report by Nintendo Enthusiast, the "Office of the United States Trade Representative has... published the list of newly-proposed import taxes... at the behest of... President Donald Trump." Unfortunately, video game consoles are on the list.

Currently, Microsoft, Nintendo, and Sony manufacture their consoles in China. While Microsoft may have facilities in Singapore and South America, it's unclear how the company will respond to the increase. The outlet added that "all those parts will be hit with a 25 percent import tax." Considering that the import tax is only 10 percent at the moment, that's quite a hike which will eventually be paid by consumers.

Hopefully, China and the United States can resolve their trade differences soon. While the price of the Xbox One may not increase due to existing inventory, there's the possibility that next-generation machines will be a little more expensive than they should be. The Entertainment Software Association expressed disappointment and surprise when it heard the news. A spokesperson said, the "video game industry boasts a trade surplus for the American economy. Tariffs will hurt the American economy, its industries, and its consumers."

If these tariffs are passed, they could go into place by the end of June. Luckily, China and the United States are still in active discussions so there's the possibility that the trade war will be resolved by then. If not, get ready to potentially pay more for hardware down the line.

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Asher Madan
Asher Madan

Asher Madan handles gaming news for Windows Central. Before joining Windows Central in 2017, Asher worked for a number of different gaming outlets. He has a background in medical science and is passionate about all forms of entertainment, cooking, and antiquing.

65 Comments
  • Do you think gamers can get a $28 billion handout like our farmers did who asked for the trade war.
  • I tell you what if these companies start bringing back manufacturing here for these toys instead of shipping it off to a country for cheap labor, a repressive country that steals IP and has grossly taken advantage of our companies, unfairly blocks their economy from competition, continues break promises & already established deals and along hacks/steals data (a lot more than Russia or N. Korea try to do) then I would have no problem giving them a similar break as the farmers (you know actual American workers - doing the work here). Actually in that case, if they did bring back manufacturing and the reverse was true, the Chinese put tariffs on these boxes I doubt any help would be needed as China currently is really not a big market for console buyers. Until that day comes this is one of the issues Sony and Microsoft have to deal with their desire for cheap Chinese labor and you as well when buying that plastic box.
  • It's more of an issue of what consumers want to pay.
  • True, but everything has a cost. Consumer's have paid lower retail prices because of cheap labor in China, but in doing so have directly funded the growth of America's ideological rival. A rival that has used this cash to transform themselves into a 21st century dystopian surveillance state with an increasingly well funded and belligerent military. The alternative is paying higher retail prices in order to move this manufacturing to India, Korea, or Japan; or paying even higher retail prices to move them back to the US into extremely automated facilities (because let's face it, even if manufacturing does come back to America, it won't create the same number of jobs that have been lost since the 1980's).
  • It's not "stealing" when a foreign company shares technological specifications to a company within a country with no IP/patent laws. The reason there is no longer a manufacturing sector in the US is because the government (both parties) embraced the neoliberal/neoconservative concept of globalism. Tim Cook even lamented this back in 2017 when he said that the US lack the fundamental skills to bring manufacturing back to the US. If you had consoles manufactured in America, with American labour laws, they would still cost more than this 25% import tax.
  • Tim Cook was wrong (like he is on just about everything.) The reason that Manufacturing has left the country is not due to labor costs (and Tim Cook knows it) it is due to the hollowing out of our Supply Chain capabilities in the US. In China, if you need a part, any kind of part, there are companies within 1-day shipping distance who make it, and they are willing to do custom work at the drop of a hat.
    In the US, you will be hard-pressed to find ANY company making the parts required to build electronics anymore, with all the fabrication and design having moved overseas 20 years ago. Look at the parts in your console or computer. NONE of them will say; Made in USA. They are made in China, Taiwan, Japan, Korea, Singapore, Vietnam, etc. The closest you will find are made in Guatemala or El Salvador (Intel has factories in both countries.)l
    THAT is why there is no electronics manufacturing on any large scale in the USA anymore. The ENTIRE electronics supply-chain moved overseas, so the Manufacturing moved with it. Sure, there are a few Intel factories, but they are making custom ASICs, not CPU's or GPUs, or Memory in any quantity compared to their overseas factories.
    WHY this all moved overseas is another issue altogether. BUT, it's gone and it's NEVER COMING BACK.
    The ONLY THING that the USA still has a Global lead in is AGRICULTURE and our dimwitted President is using that for an Ego-Tariff war with China, who have now turned to Russia and Brazil for their soybeans and rice (yes, China imports vast quantities of Rice.)
    This tariff war reminds me of the Blazing Saddles scene where Sheriff Bart threatens to blow his own head off if the Racist Townsfolk keep threatening to kill him (only Trump is dumb enough to actually pull the trigger.)
  • Manufacturing these products in China was due to the pricing competition, labor cost is high in the U.S and most of Europe, they are part of production cost, but if we consumers are ready and willing to pay it, I believe these companies will manufacture them here in U.S
  • Tim Cook said no, Americans lack the prerequisite skills for manufacturing.
  • Well, if Tim Cook said so then it must be true... :-)
  • That "prerequisite skill" being the ability to work for $2 a day in sweatshop conditions while being kept in slave-quarters on-site in the factory so you can immediately respond to production demands from Apple.
  • Nobody wants to pay upward of $1000 for a console, don't even think about buying a high end phone if it's manufacture in the US
  • Motorola manufactured pretty decent phones for reasonable prices right here in Texas, until Google sold them to Lenovo. Not too long ago.
  • Then again, to go with your below comment, think about where thos componets were made.
  • If they increase the price of a new console because of the trade war, they will not lower the costs after...
  • Ha! In Brazil if I'm not wrong, we pay 97% of import tax on video games.
  • An Xbox One S costs almost 500 USD in Brazil?
  • My friend who lives there actually paid around $1,000 for the device when it initially came out. I think one of the issues is third-party retailers hiking up prices.
  • Good old Asher! That's exactly the cause. Even Microsoft Brazil helps hiking up the prices, because Xbox was sold officially by MS BRAZIL here. Dollar here was 2,3 when the first Xbox One launched and it was sold to us for 2200 reais. When the X launched, dollar here was 3,2 and the X was sold by 4000 reais. In both cases the prices were too high. Even if you imported and paid customs taxes you would be paying less
  • Import tax is 60% in Brazil. But when a product is officially sold here they increase the price even more, blaming local taxes and dollar, which is only partially true. Why it's partially true? Well... Because the Xbox One was sold here for 2200 reais (dollar at 2,3) and the X was 4000 reais (dollar at 3,2), while both was sold on US for 500 dollars. We can see that 60 dollars digital games are sold here by prices varying from 120 reais to 250 reais. So if the taxes and dollars were the only enemies we would never see that much difference. Not to mention some games are more expensive on PS4 and sometimes more expensive on Xbox, even though they launched on the same day on both consoles and for the same price on US. So a lot of these ridiculous prices on games here (Brazil) come from Stores profit, but they smartly blame other factors because they know Brazilians will believe it.
  • Whatever happened to the GOP being for free trade and less taxes? All of this trade war nonsense is a tax on us consumers.
  • I think they just want to cater to the richest at this point. These tariffs only hurt normal individuals.
  • "At this point"? Just about every fiscal policy decision made by them in the past 10+ years has been that way.
  • That's actually completely true. Maybe even more than a decade.
  • Not true at all...most arguments against tariffs, that I'm reading, are conveniently leaving out one of the underlying drivers for the tariffs in the first place...bring the manufacturing jobs back to the U.S. In fact, one could argue that MS could use this whole situation as a competitive advantage given they are the only U.S. company in the gaming console market. They could move manufacturing of the Xbox back to the U.S....Xbox would not be subject to tariffs, they might take a margin hit on costs but could probably get a tax break from gov't for 'bringing jobs home' to offset those costs. Could also market the whole, 'Made in the USA' angle.
  • No one wants to pay more. There is great inequality in the United States. Not many can afford "Made in the USA" goods.
  • It's not about bringing manufacturing back. Remember when Canadian Steel and Aluminum had tariffs applied? Do you know what American Steel companies did? They raised their prices to subtly undercut the new tariffed price. This is why Harley Davidson had to leave the country.
  • and they make oil dripping overpriced maintenance hell motorcycles
  • That’s still jobs going abroad.
  • hopefully they can make oil pans and gaskets better than the 4000 drunks at the American Harley plant?
  • The tariffs are only temporary though. When a new president takes over in a couple years or a deal is made, they will likely go away. These tariffs are short term leverage for trade negotiations. Making huge decisions based on these tariffs, like moving your manufacturing to another continent, would be extremely foolhardy.
  • Take a hit on costs? Aren't game consoles sold at a loss?
  • Not the Xbox One and PlayStation 4. Beforehand they were I think.
  • On release yeah, they wouldn't be now though. PS4 Pro and One X might sell at a loss, not 100% sure on them.
  • It's only a 'tax' on consumers if companies choose to pass on the tariff to their customers rather than change their business practices and move their operations. Consumers hold power with their wallets if they choose to do so; don't pay the higher price if the manufacturer passes it on to you...manufacturer will either drop price point or look for other ways to maintain margins; i.e. move manufacturing OUT of a country where it costs them more to do business in the long run.
  • What is the margin in a console when you asking companies to absorb 25% of the pricing? I don't know how it will not be passed on.
  • A bit delusional to expect companies not to pass on costs to users unless forced. Also, the "choice with your wallet" doesn't mean much when you've got no options that do what you want.
  • I guess your choice is no console or PC?
  • Don't forget where the PCs are made. Or the components.
  • Free trade is a great concept if it is on a level playing field. Years ago, the US manufacturing was more efficient and could compete with cheap labor. Now US industry is saddled with substantial environmental expenses, that do not exist in China and much higher tax rates than in China, or most of the world. (When they hosted the Olympics, China had to shut down industry and ban vehicles to temporarily achieve tolerable air quality.) Tariffs that account for these inequalities is fair. The additional cost may be born by the consumer, or may be absorbed (partially) by the Chinese fabricator and the US "manufacturer". The current conditions are driven by many years of bad US trade/tax policy. New fair trade and tax polices may cause some short term consumer pain, but will be beneficial in the long term. The regulatory environment is the US has not been favorable to industry. Trump seems top be changing that.
    (I can not find a reference, but I remember Steve Jobs saying that labor cost did not prevent manufacturing iPhones in the US. In China he could go from bare ground to a functioning factory in about 9 months. In teh US he could not get zoning and clearance and building permits to start rehabilitating an existing factory in 18 months.)
  • Okay, now I am starting to care...
  • tariffs are only to consoles made in China? if I recall correctly microsoft made some Xboxes in Mexico (Guadalajara to be precise) they could use consoles made in Mexico for US and those made in china for the rest of the world
  • I'm pretty sure that was the original Xbox, so it was around 20 years ago that Xbox manufacturing was in Mexico.
  • They were also quite expensive.
  • This is good thinking and should work if they still manufacture in Mexico
  • I'm going to be super pissed if the next Xbox retails for $625.
  • Well, maybe $599, instead of $499.
  • So we would only get a 20% tax cost hike instead of the full 25%. What a savings!!!
  • They’ll probably increase it altogether by $100 or $50.
  • Funny how everyone thinks this is all just about some 'new' trade war. Guess that's why China has banned Google, and why Russia made a deal with sailfishOS. Tradewar is simply an extension of a tech war. Countries are fighting to keep foreign software and hardware out to improve national security. And that part, isn't going anywhere (the tariffs on consoles might go away, but these issues in general aren't) It's not just about the trade. The US govt doesn't want to rely on the chipsets and components of it's superpower political rivals. Endgame is zero hardware and software from China or Russia, and I'm sure China wants the reciprocal deal. Of course it's doubtful either could get that far, but you watch, this isn't going to end when the tariffs calm down.
  • They will just set up shop in Mexico, import from China, do maybe the final step of assembly in Mexico and export them to the US with no real issues.
  • The good news for the alt right is that this shouldn't affect the rent they pay for the room in their mothers' basements. Absolutely loving the armchair economics in the comments here BTW lol...
  • you far lefties think anything that isn't far left is alt-right. Not very intelligent or at all true.
  • I think a large part of the problem is that people feel the need to classify themselves with one of these stupid sides and feel the need to defend ANY action they take. Then, they totally dismiss what anyone on the other side says or thinks because they are obviously wrong by not being on their side. Then the name calling or hatred commences. Think for yourselves, have your own values, hold every one accountable, stop believing every idiot on social media. There isn't a one size fits all approach to everything, nothing is just red or blue, left or right. All there is is just life with its complicated problems that need to be solved.
  • Yeah I can't take anyone who uses the term alt-right seriously. It's misapplied more often that it's correctly applied. Even 'neo ****' is suffering the same fate. Boy who cried wolf right there.
  • Couldn't agree with you more.
  • I only know two people who live in thier parents basement. One of them fell on tough times because of bad choices and the other is an Uber lefty who pisses and moans when their government check doesn't come in the day they expect it to. Oh and that person is 29.... Such a waste.
  • Excellent. Trump should use the rest of his first term to crash the Chinese economy and bring USA-based companies back to the USA. If they refuse, severely fine them. I don't mind paying an extra few bucks for something as long as it helps the USA. Seems to be working so far. Trump's second term will be even more amazing (sorry lefties at Windows Central, but he's gonna get re-elected)
  • Yes, crash the Chinese economy, because the US economy is super strong with trillions of dollars of debt and isn't current running on borrowed Chinese funds at this point. Also, we don't live in a world wide economy at this point in history, so there should be little repercussions if an entire nation's economy crashes. I mean, it's not like the US brought down the rest of the world when the stock market crashed the past couple of times. Let's not forget that the US doesn't lean on China to produce just about anything that we use on a daily basis. So if the Chinese production ceases, then US will be sitting pretty and we can keep wearing our cheap clothes, eating our food, and using our electronics.
  • Great Depression mark 2 is inevitable. National debt for the US and Europe is near breaking point. Really only a matter of when, and that it might be triggered early by any of: trade wars, actual wars, excessive spending, european migrant crisis etc.
  • Inequality is also very high right now because the wealthiest are being helped by the government. Normal people don’t have the funds to pay more like you. The majority of this country lives from paycheck to paycheck now.
  • The majority of this nation has always lived paycheck to paycheck. Nothing new there.
  • I don't mind paying a bit more. ( for a little while) The president knows what he is doing and if he can get china to be more fair in the future, its worth it. We have gotten unfair deals in the past, and they steal our intellectual property. I hope Microsoft will use singapore and south america.
  • "The president knows what he is doing"
    Let me stop you right there, he has already showed countless times that he does not, and every economist agrees. The tariffs don't hurt China one bit, they do hurt farmers, american consumers and the US treasury though.
  • Did you cry when Hillary lost? Seems that way. Trump is doing a great job. He is up there with Reagan. Go back to your brony party.
  • Economists are skeptics and cowards. They are listened to when it's beneficial and ignored when not. Farmers will find alternatives, manufacturers will find new suppliers or build their own needs and treasury has been run by imbeciles since Alexander Hamilton. The US needs to stop raising it's debt. The debt pisses many of us off.