The whole world is talking about US tariffs, and the games industry will be affected.

Mat Piscatella of Circana (formerly NPD Group) has already stated that it will be one more nail in the coffin of already dying in-store game sales.Meanwhile, Rhys Elliott, analyst at Midia Research, has provided WCCFTech with a longer analysis of how Donald Trump, president of the United States, will affect disc/cartridge versions of games.In short, it will be bad and it will hit the economy hard.While the state of the game industry is not very strong (rising costs, layoffs, studio closures), this will only make things worse…

“The US tariffs will affect the gaming market in several ways. Hardware will obviously be affected, as many components are made in China, one of the main targets of the tariffs. Already, GPU sellers like Newegg have announced price hikes on Nvidia’s RTX 5000 GPUs as a direct result of increased tariffs on components made in China. However, most of these GPUs are still sold out (and scalpers are charging even more than the original marked-up prices). So the immediate impact in this case was small. But further down the road, as US inventories of GPUs, smartphones, and other consumer electronics are depleted, the impact will be felt more widely. According to Trump, the US tariffs will result in “a much stronger, much richer nation.” However, this is just populist politics in action, as the tariffs will actually result in a weaker, poorer nation. Contrary to the U.S. administration’s public rationale for the tariffs, it is ultimately the average consumer who will bear the brunt of this populist policy.

Some manufacturers are likely to move production to non-tariff affected markets as a result, which is already happening, but this is only really possible for the largest companies that have the scale to eat the lower margins. In most cases, smaller companies-and even some larger ones that rely solely on hardware-cannot afford to do so. However, hardware is sometimes just a Trojan horse for companies to create software. Manufacturers of some hardware, such as the Steam Deck, sell their hardware at a loss, while others barely break even. For this reason, companies like Sony (for its PlayStation 5s) and Valve (for its Steam Decks) may simply eat the increased costs caused by the tariffs because they don’t want to limit their total addressable markets to sell more software. Since many game discs sold in the US are manufactured in Mexico, another target of the tariffs, physical media will also be affected. Some publishers will eventually drop physical versions of their games. But that will only accelerate the inevitable. And most publishers and console platform owners want physical to die anyway.

The console market is already increasingly digital, driven by strategies like multi-game subscriptions, the rise of free-to-play, and platform owners pushing consumers to digital versions with perks (like extra cosmetics and the ability to pre-load a game so it’s ready to play when it launches). Of course, a unique value proposition of physical games is the used and rental market, which gives players more choice. But platform owners and publishers do not make money from physical rental and resale. After all, a game can be sold or rented 100 times on the resale market, but the publisher and the platform holder only get revenue from the first sale. A digital-only market also means that publishers and platform holders have more control over prices. Price in the physical games market is more elastic than in the digital market, and therefore more subject to supply and demand, which is why (used) physical games are often cheaper than titles found on the PlayStation and Xbox digital stores.

The death of physical games would ultimately be bad for consumers, giving them less choice, but positive for publishers. And the imposition of these extreme tariffs will also be bad for consumers, but good for the populist facade of the US government. Policies that lead to higher prices for ordinary people in the midst of a cost-of-living crisis are deplorable. What’s more, data has consistently shown that tariffs hurt the economy. Simply put, tariffs are bad for gamers and the game industry. While I won’t comment on the real reason for the U.S. tariffs, it’s certainly not for ‘a much stronger, much richer nation’ – in terms of everyday people and fair business,” Elliott wrote.

So in the end, it will be ordinary people who get hurt again…

Source: WCCFTech