Last week, I discussed the implications of the TSA baggage screening policy on the Nintendo Switch. There is, however, a much more concerning possibility in play: The Switch could find itself in the crosshairs of the U.S.’s incoming 45th President.
Since his election back in November, Donald Trump has been throwing his weight around on Twitter by criticizing companies over things like product costs (Boeing, Lockheed Martin) and outsourcing (Ford, General Motors). Companies on the business end of Trump’s tweets have suffered serious financial losses as a result, putting companies on edge in fear of drawing Trump’s ire.
While being a Japanese company won’t protect Nintendo from such criticism (as Toyota found out the hard way), being a gaming company reduces the chances Nintendo will be targeted directly. Game console manufacturing doesn’t have the kind of history in America that the auto industry does, and thus it lacks the visibility and impact that Trump is looking for. However, there are still reasons for Nintendo to be nervous about the upcoming presidency and its effect on the company’s bottom line. For example:
- Protectionist trade policies could increase the cost of a Switch or 3DS. If there has been one consistent theme of Trump’s campaign, it’s that the man does not believe in free trade. The Trans-Pacific Partnership (TPP), a deal between 12 Pacific Rim countries that removes thousands of tariffs from the books and includes many labor, environmental, and other regulations promoted by the U.S., has already been declared DOA by the new administration, and Trump has repeatedly threatened that corporations who import products into the U.S. will face a stiff border tax.
Consumers tend to treat video game consoles like any other product: The more expensive it is, the less likely they are to buy it. The current rumor of a $250 Switch has been met with a lot of applause on the Internet, as it came in at or underneath a lot of people’s expectations. Slap a 35% tariff on the Switch as Trump threatened to do to Ford, however, and that price jumps to a concerning $337.50. A hypothetical $299 Switch bundle (one with more memory, an included game, or both) now becomes a whopping $403.65, which would make even a diehard Nintendo fanboy like me have second thoughts about the system. Add another $81 ($60 * 1.35) each for Splatoon Switch, Mario Switch, Zelda: BotW, etc., and that extra cash adds up in a hurry.
Of course, this is all assuming Nintendo even decides to play ball in a tax-heavy environment: When faced with a similar situation in Brazil, the Big N responded by pulling out of the market entirely. (What’s worrisome is that Sony mentions the possibility of moving some PS4 production into Brazil to avoid the taxes, which could be cited by free trade skeptics in the U.S. as proof that protectionist policies work.) The American market is too large and lucrative for Nintendo to take that drastic of a stand here, but if things start drying up in a year or two, anything is possible.
- Trade regulations aren’t the only pressure point in this scenario—travel regulations could come into play as well. I’ve already covered the impact the TSA might have on the Switch’s success, but it’s also worth noting that the TSA operates under the Department of Homeland Security, the head of which lives in the President’s cabinet (and is thus picked by the President himself). Gen. John Kelly, Trump’s pick for DHS secretary, appears to be one of his less-controversial picks, but Kelly’s statements have mostly focused on border security up to this point, so it’s hard to say how he would handle TSA regulation issues. The bottom line, however, is that a direct appointee of Trump’s would have the power to tighten and loosen rules governing electronics at TSA screening stations, and the Switch would be at their mercy.
- Trump doesn’t like things that are made in China. Guess where the Switch is manufactured? China has historically not been a big fan of console gaming (considering consoles were banned in China between 2000 and 2014), but the Wii U was manufactured at China’s infamous Foxconn facilities, and it appears the Switch is being produced there as well. If there’s one things Trump like to rage about, it’s that China is using unfair labor practices and free trade to entice companies to relocate their manufacturing operations just as Nintendo has. If the U.S. and China get into a tit-for-tat spat over trade, Nintendo (with its production facilities on one side and its largest market on the other) will likely suffer from whatever negative consequences arise (Slowed production and shortages, higher prices, negative PR, etc.).
If the aftermath of the Wii U’s failure, Nintendo needs the Switch rollout and release to go as smoothly as possible to reassure investors and fans that their company’s future remains bright. Donald Trump, however, the power, the momentum, and the motivation to make life miserable for companies like Nintendo who are operating outside the US. In short, Nintendo should be very worried about Trump, and should probably have a contingency plan ready if (when?) they end up in his line of fire.