How Trump’s Trade War Could Decimate the PlayStation

Journalist:
August 5, 2019

The Sony PlayStation 5 launch remains at least a year away, but speculation over its price point has already become a hot topic among gamers.

One Swedish retailer appears to be already taking PlayStation 5 pre-orders at a jaw-dropping price of more than $1,000, while some industry analysts believe that the console will be priced at a significant premium thanks to high-spec hardware.

Now, Sony itself admits that consumers might have to pay through their noses for the next-generation PlayStation console thanks to sudden escalations in President Donald Trump’s trade war with China.

Sony warns of higher PlayStation prices

Last week, President Trump threatened to impose new 10% tariffs on $300 billion of Chinese goods from September 1.

The bad news for Sony is that PlayStation consoles fall under that new import duty, according to the Wall Street Journal. Chinese manufacturers account for the majority of PlayStation 4 production, and that’s unlikely to change when the next generation PS5 arrives.

This means that the PlayStation 4 will now cost more to import into the US from Sept. 1 when the new tariffs come into effect.

Even worse, China’s retaliatory measures suggest that there won’t be a swift end to the trade war, with one analyst warning that Beijing might have already “all but abandoned hopes for a trade deal with the US.”

Sony’s finance chief Hiroki Totoki told the Wall Street Journal that tariffs “haven’t affected us that much, but we should remain vigilant about the potential risk.”

This is a veiled warning indicating that consumers should be prepared to pay more money for PlayStation 4 consoles in about a month’s time.

But that might just be the start of Sony’s problems.

Higher production costs could force Sony’s hand

Higher production costs could cause Sony PlayStation 4 sales to slump even further, and they could roil the PS5 launch. | Source: Justin Sullivan/Getty Images/AFP

Analysts warn that the Trump administration could increase tariffs on “all Chinese goods” to 25% for the next four to six months and send the global economy into a recession.

Sony would face an unenviable dilemma if that happens, even more so if those tariffs linger until after the PlayStation 5 launch. The Japanese giant would have to choose between taking an even steeper loss on the hardware or passing on the increased import tariffs to consumers by raising the price of the PlayStation console.

And if the economy succumbs to a recession, consumers might think twice before spending on a discretionary item such as a gaming console. This spells trouble for the PlayStation business as Sony is currently grappling with weak console sales.

PlayStation 4 sales fell below Sony’s internal expectations for the quarter that ended in June. This forced Sony to lower its fiscal 2020 PlayStation sales target by 1 million units to 15 million. Assuming that prices of the console are raised in light of the US-China trade war, sales could take a bigger hit.

At the same time, rival Microsoft is reportedly looking to lure more customers with a smart strategy of offering a lower-priced streaming console that could knock the wind out of Sony’s sales – especially if the PS5 proves to be as expensive as some analysts warn.

Disclaimer: The views expressed in the article are solely those of the author and do not represent those of, nor should they be attributed to, CCN.

Harsh Chauhan @techjunk13

Harsh covers tech, gaming, cryptocurrencies, and other financial topics on CCN since 2019. He has also written for other reputed publications such as The Motley Fool, TheStreet, and Seeking Alpha, and gets regularly featured on Yahoo! Finance. Harsh is based out of Indore, India. You can follow him on Twitter @techjunk13 or email him at harsh.chauhan(at)outlook.com.