The price of the PS5 and Xbox Project Scarlett is still up in the air and could be affected by world events out of the control of either Sony and Microsoft.
The U.S. Trade Representative held hearings earlier this month regarding proposed tariffs on over $200 billion in Chinese goods.
Included in this list were video game consoles and the idea that Tariffs would increase by up to 25%.
And there is no doubt that if this change happened, it would massively impact the price of the PS4, Xbox One and Nintendo Switch.
But not only that, as the price of the PS5 and Project Scarlett would also be affected.
Both consoles are expected in 2020, and new tariffs would mean either pushing higher prices on consumers, or leading major manufacturers having to change their current production setups.
A joint letter was released by Sony, Microsoft and Nintendo earlier this month, spelling out how “Instituting tariffs would lead to reduced R&D investment, as console makers scale back on revolutionary new technologies.”
The arguments laid out revealed how these tariff changes would not only affect the big hardware makers but would also trickle down the whole supply chain and hit game developers too.
But the good news for everyone is that these new tariffs have now been put on hold.
Trade talks between the United States and China have been confirmed as restarting this weekend, meaning these new tariffs have been delayed.
Speaking to the press after a meeting with Chinese President Xi Jinping, President Trump revealed that trade talks were set to begin again.
This won’t mean that current tariff will be lifted, only that the ones recently proposed will not be going into effect, for the time being.
“We’re right back on track. We’ll see what happens,” Trump revealed during his G20 news conference in Japan, via CNN.
“I promised that for at least the time being we’re not going to be lifting tariffs on China. We won’t be adding an additional tremendous amount — we have $350 billion left that could be tariffed, taxed — we’re not going to be doing that.
“We had a great meeting and we will be continuing to negotiate.”
This is great news for Sony, Microsoft and Nintendo, as they will see hope of avoiding new tariffs being dropped on their leading products.
The joint letter shared by the big three spelt out how consoles themselves don’t provide a great degree of profit but are hugely important when it comes to building a market ecosystem.
“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,” the letter states.
“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.
”Given that the main purpose of video game consoles is to play games, as significant as the impact of tariffs would be for video game console makers and consumers, the harm to the thousands of U.S.-based game and accessory developers who depend on console sales to generate demand for their products would be equally profound.
“The ripple effect of harm could be dramatic. Our consoles have generated a vast ecosystem of small and medium-sized game developers. A significant number of the games played on Microsoft, Nintendo, and SIE video game consoles are not developed by our companies in-house.
But while this latest development will be seen as a positive move for the PS5 and Project Scarlett, the risk still remains.
If the new trade talks fail between the two countries, the proposed tariffs could still move forward and hit Microsoft, Sony and Nintendo hard.