Commentary: Trump's tariff plan would hit a key voting bloc's favorite pastime — video games
11/02/2024 00:35
Among the many products Donald Trump's China tariffs could touch is video gaming equipment. Meanwhile, the Trump campaign is zeroing in on male voters under 50 in swing states — also known largely as gamers.
Donald Trump's proposed tariffs could land a critical hit on gamers' wallets if they go into effect.
The Republican presidential candidate is promising to enact 60% tariffs on Chinese imports and 10% to 20% on all other imports if he wins a second term. Among the many products the tariffs could touch is video gaming equipment, which largely flows out of China.
Rather than convincing companies to move their gaming supply chain onshore — one of the goals of Trump's tariff plan — experts say the duties would more than likely show up as higher prices, up to 45% more, on game consoles and accessories.
"It's basic economics," said Lewis Ward, a gaming research director at IDC, which provides market data for the IT, telecom, and consumer tech industries.
"They will pass on the cost of that increased import duty to customers unless they want to make less money. And I've yet to find a high percentage of corporations that are willing to destroy their profit margins in order to keep their prices the same."
Who would feel the most pain? Younger men, who are the largest gaming demographic in the country and a key voting bloc that the Trump campaign has courted. But many others, too, as gaming popularity spreads.
Read more: What are tariffs, and how do they affect you?
Last year, the third largest import from China in terms of value was toys, including video games, totaling $32 billion. Even though some manufacturing of gaming equipment moved to other countries — such as Vietnam and Mexico — during the pandemic when China's operations shut down, the US still imports 90% of consoles from China, according to a 2022 data analysis.
Other equipment gamers use to play — such as laptops, computer monitors, and smartphones — also largely come from China, the analysis found.
That means the tariffs would be a "direct hit," Ward said.
"If you're an investor or a manager or maybe even a frontline worker of the companies that manufacture a majority of your products in China…it would be like a tidal wave hitting the market as far as I'm concerned."
Game manufacturers sell about 40 million video consoles worldwide per year at about $500 a pop — with half of that in the US, said Michael Pachter, a managing director at Wedbush Securities. That means the tariff impact would be "a couple of billion dollars."
"Console manufacturers won't eat it," Pachter said. "They'll pass it through."
Same thing with accessories and other gaming equipment. Overall, gamers can expect to see prices increase anywhere from 11% to 45% on gaming equipment, according to a recent analysis commissioned by the Consumer Technology Association (CTA). That works out to shelling out $35 more on headphones on average, $109 more on monitors, $246 more on video game consoles, and $357 more on laptops.
Maybe someone should share those figures with the Trump campaign, which is zeroing in on male voters under 50 in swing states — also known largely as gamers.
According to the Entertainment Software Association, 82% of Gen Z males ages 12 to 27, and 74% of millennial men ages 28 to 43 play video games at least an hour a week. Overall, 61% of US households play video games.
"So you're talking demographics that approach parity with the United States," Ward said.
In Trump’s virtual reality, those gaming equipment operations would quickly materialize on US soil.
“The higher the tariff, the more likely it is that the company will come into the United States and build a factory in the United States so it doesn’t have to pay the tariff,” Trump said in an interview last month at The Chicago Economic Club.
In fact, the CTA report found that the 60% tariff on Chinese imports will mostly propel production to other countries — not to the US — where the tariff hit is either 10% or 20%.
Moving manufacturing back to the US is a multiyear effort, Ward noted, that requires identifying suitable facility locations, getting permits to build, and massive amounts of money to get up and running.
"There is 0% chance that if those [tariffs] go into effect in early 2025 that we're suddenly going to see consoles manufactured here by the end of the year," Ward said. "That is a 0% chance."
Instead, companies will keep low-margin products like controllers in Southeast Asia to make the math work, Pachter said.
It costs $10 to $13 to make a controller, but if made here, that would double, he said. A 10% tariff from, say, Vietnam on top of the existing price is better.
"They're not going to move it here. They lose $3 to move here," he said. "They'll just let the consumer deal with it."
Janna Herron is a Senior Columnist at Yahoo Finance. Follow her on X @JannaHerron.
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