this post was submitted on 04 Apr 2025
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If you have a product that cost 500 with a markup of 50, but tariffs are pushing it to 750, it could easily be worth spending 50 to reduce tariffs to 650 and sell it at 700. You make just as much profit on each unit and you reduce the per unit cost which likely means more sales.
What?
You have a product that costs 450 to produce.
And you add a 50 markup so you are selling at 500.
Tariffs push that 500 up to 750. Which means a 50% tariff.
So you remove your 50 markup and sell it at cost in that market. Which means a product at 450 with a 50% tariff will cost 675.
You don't make any money on that sale. Fine, it's a loss-leader. Hopefully you make up the profit of game sales and subscriptions. Which will also be tariffed.
For a finished product, the tariff is applied to the selling cost. It doesn't care about the value of the parts or the amount of markup.
A government isn't going to pick through a device and apply Country of Origin tariffs on every part, or separate company profit from cost-of-product.
If a company says a product is worth 500, that's the amount the tariff is applied to.
I doubt Nintendo is going to eat the cost of tariffs.
It's insane to. They could say "we will still launch at this price", and have the us government cook up more tariffs or whatever. Then Nintendo is holding the bag, or has to renege on the price.
It would be smarter to mildly offset the cost. Like you say, knock $20-50 off but stipulate the final cost is subject to import duties.
I'd love them to say "well, you do you. This is the cost of the console. Your import duties are not out problem." But I feel (despite their bullshit legal department) Nintendo is more passionate than that, and I think they will mildly reduce the price