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Game console manufacturing hurt by China tariffs

US President Donald Trump

According to The Washington Post, the White House announced a delay in the rollout of the planned 10% tariffs on some Chinese-manufactured goods, after months of ongoing trade disputes between the US and China, sparked by the fiery ultra-nationalist rhetoric of President Donald Trump.

The push to attack the Chinese economy pushed by the Trump administration also applies to video games and related hobbies. Trump even proposed a series of 25% tariffs on video games and board games produced overseas. This was met with condemnation from industry analysts and companies, including Sony, Nintendo and Microsoft.

Sony’s Chief Financial Officer, Hiroki Totoki, recently told The Wall Street Journal that Sony might have to raise PlayStation hardware’s price — including the PlayStation 4 — in response to these proposed tariffs. This combined with Sony attempting to lock down digital distribution is leading Sony down a strange path.

These tariffs are looking worse and worse as well, as the economy takes a dive. And the Trump team is now pushing to delay these fees until the end of the year. Alongside video game consoles, which are classified under HTSUS 9504.50 in the list of exemptions, other technology-related items such as laptops, home goods, and toys are exempt from the tariffs until December.

Other tariffs, including those on food products, are still set to roll out next month.

This whole mess is actually getting rather heated, as economic signs point towards yet another major recession. Stock markets dropped by hundreds of points, signaling a major loss in value and confidence in the market, yesterday. The DOW closed down 800 points, or about 3%.  But that drop isn’t the most alarming part.

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There’s a special benchmark within the US economy based on treasury bonds — these bonds are issued by the US Treasury to private investors to allow the government to finance spending, which well then be repaid at a certain percentage after a number of years — and there’s a big problem brewing. The maturity rates on these bonds vary, with terms as long as thirty years, and the focus in this latest development is that the 10-year term bonds have fallen below the two-year term bonds in terms of overall yield. In other words, you would get a higher interest rate for government debt that matures in two years than in 10 years.

And this is a signal of an impending recession based on precedent. Each of the last seven recessions, dating to 1969, was preceded by the 10-year falling below the two-year in terms of yield.

The general consensus is that Trump’s policies toward trade have swung back in the other direction, and caused a massive loss in consumer confidence and business spending.

 

 

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