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Last week, the Financial Times reported that Nintendo shifted half of its production capabilities for the upcoming Switch 2 to Cambodia and Vietnam, in part to avoid Donald Trumps trade war on China. Wednesday morning, Nintendo formally announced the Switch 2, and its $449 price, which is $150 more than the Switch. A few hours later, Trump announced tariffs on the entire world, with particularly large fees on China, Vietnam, and Cambodia.There are going to be far more important and damaging impacts of Trumps unilateral trade war on everyone than the price of an already expensive game console likely going up. The U.S. stock market has already plunged. But the timing and narrative around the Switch 2the successor to one of the most popular games consoles of all timehighlights how destabilizing this is likely to be, the interconnectedness of the global economy, and the fact that Trump cannot just snap his fingers and onshore manufacturing to the United States without massive pain. Gamers, understandably, are pissed, and award-winning economists say they are right to be. I thought it'd be useful to discuss the broader impact of the tariffs with leading economics by focusing on the Switch 2, because it's such a high-profile item.The policy announcement is astonishing for its stupidity, Gene Grossman, a global trade expert and Princeton professor who won the Onassis Prize in International Trade, told 404 Media. It seems like a joke! He added that it is hard to know exactly what will happen given the overall sea of idiocy brought on by the tariffs.Since Trumps announcement, it has become clear that the administration calculated the tariffs for each country based on a crude formula that takes each countrys trade deficit with the United States, divides it by two, and sticks a percent sign at the end. This means new tariffs on Vietnamese-made goods will be 46 percent and new tariffs on Cambodian-made goods will be 49 percent.If [the Switch 2] is something that consumers are dying to have at any price, then the price will go up. If consumers can readily switch to something else, then if Nintendo wants to sell these things, it will have to lower the price, Grossman said. Yes, I think it is quite possible that the price will go even higher than $449.99. Some expectations of a tariff may have been built into this price, as you suggest, but I dont think anyone expected a 46% tariff on Vietnam, not even close.Kimberly Clausing, a professor of tax law and policy at UCLA School of Law, told 404 Media that the tariffs announced will definitely increase prices further over what is baked into price levels currently, and that Nintendo will have other markets they can sell to tariff-free, so they have no reason to sell at a special low price in the United States, certainly not enough to offset the full tariff.Felix Tintelnot, an associate professor of economics at Duke University, told 404 Media it can be costly for companies to change their publicly announced prices."I think two things are true at the same time: 1. It is likely that Nintendo did not expect the tariff on Vietnam to be 46%," Tintelnot told 404 Media. "2. It is costly for firms to change prices, particularly after publicly announcing one. So I would think it is somewhat uncertain what they will do. One possibility would be for the price to remain unchanged, but the price of complementary goods to increase, such as games."Jason Cherubini, an executive in residence of finance at Loyola University Maryland, said its possible Nintendo had already priced in some unknown level of tariffs prior to the announcement, and that he thinks the price for the Switch 2 is unlikely to change because video game companies have historically sold consoles at a loss and then made money back on the sale of games.Nintendo started to diversify their manufacturing away from China with the impending threat of tariffs but also to move away from geopolitical concentration in China. But these tariffs were not wholly unexpected, he said. I think the price they announced is the price thats going to stick, because with consoles a lot of pricing is strategic pricing as opposed to being based on the true cost of manufacturing it especially Nintendo, who really keeps all of their IP, their games, so much of that is in-house, its probably even more important for Nintendo to get people to have the console, so that way they're buying Zelda, they're buying Mario, they're buying all of these IP that Nintendo then profits off of. Getting people to purchase it is more important than them making money on the console itself.We dont know what is actually going to happen with the Switch 2 yet, but prices are almost definitely going to go up for almost everything across the entire economy, Grossman said.While I cant say confidently about this item, I can say that prices will go up for a whole range of goods, starting with cars and right on down to clothing, he said.Trump has announced these tariffs with the nominal goal of moving manufacturing to the United States. Reshoring manufacturingespecially of high tech goodshas been a goal of various administrations over the years, and was a goal of Joe Bidens CHIPS Act, which the Trump administration has sought to gut.There are numerous practical problems with trying to bring manufacturing jobs back to the United States. They include the fact that lots of factory work is so underpaid and grueling that people in China dont even want to do it anymore; the average age of factory workers in China is rising and companies there have begun shifting jobs to more developing nations like Vietnam and Cambodia.Many of the raw materials and components needed for tech manufacturing are not mined or made in the United States, meaning those components and rare earth metals are going to be subject to tariffs. American companies do not have the expertise or ability to build lots of products in the United States, and setting up factories and supply chains to do so is not going to be an overnight process, it will be one that takes years or decades depending on the product.Nintendo would need to spend billions to open a factory in the US, Daniel Ahmad, director of research and insights at Niko Partners and a video game market analyst, tweeted. It'd probably take 4-5 years to complete this. Not to mention the time and cost to rebuild supply chain infrastructure and source components (which would be subject to tariffs because they're made outside the US). Nintendo would have to pay each worker about 10x to 15x more than they would for a worker in Vietnam. Then after you add up the initial capital expenditure, labor cost, supply chain cost, operational costs etc... you'd be able to buy a US manufactured Nintendo Switch 2 in 5 years for a significantly higher price than $450. And the kicker is that by the time they've done all that, the US will have a new president who most likely removes all the reciprocal tariffs anyway.Cherubini said that reshoring electronics manufacturing is not something you can just flip a switch on. Optimistically youre looking at a year for simpler manufacturing, but a lot of it is a multi-year process.I have covered attempts by the electronics industry to create high tech factories and mining operations in the United States; many of them are not going particularly well. The United States has only one rare earth minerals mine (in California), which has been mining for less than 10 years. Foxconn and TSMC factories in the United States have had a mixed record and do not have anywhere near the sophistication or capacity as their factories in Taiwan and China.This is all to say that, based on where things stand this morning, we are in for a world of economic pain.
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