Nintendo May Sell the Switch 2 at a Loss Due to Tariffs

04/11/2025 Game Consoles

The Nintendo Switch 2 is shaping up to be more of an evolution than a revolution, mirroring its predecessor in functionality. Sure, we're talking detachable controllers that can double as mice, a larger screen, beefier hardware, and a built-in mic for voice chat. But broadly speaking, Nintendo isn't straying too far from its winning formula. However, a potential shake-up is brewing in its business model, with whispers of the company selling the console at a loss.

While President Trump has temporarily eased the most stringent tariffs, the sting remains. Tariffs on imports from China have climbed, and even imports from elsewhere are subject to levies. The US, a critical market for Nintendo, accounts for a substantial chunk of their sales, making this a precarious situation.

The Price Game

According to reports, Nintendo is strategically ramping up Switch 2 production in Vietnam to circumvent higher tariffs. The goal? To flood the US market during the 90-day tariff freeze. However, even with this tactic, a 10 percent tariff looms, potentially forcing Nintendo to absorb the cost, even if it means taking a hit on each sale.

One analyst suggests that the Switch 2's bill of materials hovers around $400. Even with a $450 price tag, the 10 percent tariff could push Nintendo into selling at a loss in the US. However, this loss is deemed manageable. Meanwhile, Sony, heavily reliant on Chinese manufacturing for its PlayStation consoles, faces a tougher predicament and might be forced to hike PS5 prices in the US.

Another analyst suggests that Nintendo will take the hit and keep the price at $450 if the tariff on Vietnamese imports remains at 10 percent. However, "At 46 percent Vietnam tariffs, I expected them to raise [the Switch 2 price] by $50 to $100."

A Shift in Strategy?

Historically, unlike Sony and Microsoft, Nintendo has avoided selling consoles at a loss, instead relying on software sales to bolster revenue. While Nintendo is diversifying into areas like movies and theme parks, gaming remains its bread and butter. The prospect of selling the Switch 2 at a loss, even due to tariffs, marks a significant departure from this strategy.

The timing couldn't be more dramatic. Nintendo unveiled the Switch 2 mere hours before the announcement of higher import tariffs. Consequently, pre-orders for the console were delayed in the US and Canada to assess the tariff impact. With the tariffs currently on hold, Nintendo is likely eager to resume pre-orders to gauge North American demand and adjust manufacturing plans accordingly. The coming months will be critical in determining the Switch 2's fate in the face of these economic headwinds.