Why Switch 2 Canadian price might be impacted by US tariffs
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After the fanfare of the Nintendo Switch 2 reveal in a recent Nintendo Direct, there's been a lot of confusion regarding the price of the Switch 2 in Canada, especially with the on and off punitive tariffs planned by the Trump administration in the United States.
SM128C is a Canadian based gaming website and we can explain how the Nintendo Switch 2 price can be potentially affected by US tariffs.
Currently, Canada does not charge tariffs on video game consoles. This can be easily verified by verifying the Canada Border Services Agency's Customs Tariff.
Under the 9504.50.00 category, video game consoles have a 0% tariff if made in a country that is a "Most Favoured Nation" which is any country that is a member of the World Trade Organization. Similar to the original Switch, it is believed that the Switch 2 is manufactured in China and Vietnam, both of which are WTO members.
There's a lot of misconception online and wild claims saying that if Nintendo ships the Switch 2 consoles directly into Canada and not via the US, then it won't be affected by US tariffs.
Even if the Switch 2 consoles are shipped via the US, they will not be subject to whatever tariffs the US imposes on their consumers because these products are merely transiting that country. Tariffs are charged based on where goods are manufactured or produced, not by where they were shipped from.
Assuming the US still recognizes the General Agreement on Tariffs and Trade (GATT), under Article V, it forbids any duties or charges for any transit goods, in essence it does allow such a restraint of trade across borders.
The announced MSRP of the Switch 2 is $449 USD in the United States, and $629.99 CAD in Canada. At current exchange rates, the price is actually marginally less in Canada. It's possible that the Switch 2 MSRP is rather high due to Nintendo baking in some level of expected tariffs into the price, especially when the Japanese-only Switch 2 is around $340 USD.
But for some analysis, let's make an assumption that the wholesale price of the Switch 2 is about $400 USD, which allows for a profit margin for Nintendo's retail partners.
If the US charges a 10% tariff on a Vietnamese-made Switch 2, and Nintendo does not absorb this tariff, this would make the price then $450 USD, and say add another 10% margin on top, would make the Switch 2 around $500 USD.
If there is a 46% tariff, then that could make the Switch 2 price nearly $640 USD in the United States! This can be calculated by taking the estimated wholesale price $400 USD, multiplied by 1.46 for the tariffs, multiplied by 1.1 for a 10% profit margin.
As Canada does not charge tariffs on video game consoles made from anywhere, the retail price can remain the same (around $450 USD) while retaining the same profit margin.
If there is a big price difference between the two countries, it can encourage Americans to buy the Switch 2 in Canada for a much lower price. Travellers returning to the US can bring back $800 USD worth of goods under a personal exemption, which would be more than enough to buy a lower priced Switch 2 in Canada. (There has been speculation that the US may also abolish this type of exemption, but currently it has not happened.)
A large potential price difference may cause an unprecedented demand on Switch 2 systems in Canada if large numbers of American consumers end up trying to scoop up the product and bring it back south of the border.
It's likely a tough situation for a business like Nintendo to be in. Nintendo likely doesn't want to alienate customers further by raising the price in Canada (to match a potential higher US price) when it simply isn't subject to any additional tariff charge, but at the same time they also can't allow a potential run on the supply for the smaller Canadian market.
What will happen to the Switch 2 price? Will Nintendo simply absorb some of the costs? It remains to be seen, but we'll gradually know more as we approach the June 5 launch date.
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