The big picture: Although the Trump administration just announced a one-month delay on most imports from Canada and Mexico, the eventual resumption of tariffs on Mexican goods could significantly impact the production of physical video games. This unintended consequence may compound the challenges already expected to slow the gaming industry due to existing tariffs on Chinese imports. Analysts predict that a 25 percent tariff on goods imported from Mexico would substantially affect the U.S. retail console game market. Since Mexico plays a crucial role in physical game production, these import duties could lead to higher prices or an increased shift toward digital-only game releases.While video game discs sold in the U.S. were once manufactured domestically, analysts Mat Piscatella of Circana and Daniel Ahmad of Niko Partners note that much of the industry's critical production infrastructure has since moved to Mexico. Historically, nearly all of Sony's discs were produced at an Indiana plant, which now mostly makes the boxes for PlayStation 5 game cases.Very small piece of all this, but it wouldn't surprise me to see physical games that would be subject to tariffs simply not get made, with pubs moving to an all digital strategy. What a mess.[image or embed] Mat Piscatella (@matpiscatella.bsky.social) March 4, 2025 at 8:21 AMPresident Trump has repeatedly threatened to impose a 25 percent tariff on various imports from Canada and Mexico. The administration has now delayed the decision for a second time, but once the delay expires, the resulting cost increases could hit both game publishers and retailers.Meanwhile, the existing 20 percent tariff on Chinese imports is expected to continue driving up hardware prices. // Related StoriesGame companies might respond by passing these costs onto consumers, but the impact would likely extend beyond physical game prices. While digital sales eliminate the costs of manufacturing discs and sharing revenue with retailers, publishers often pocket the difference rather than reducing digital game prices potentially straining their relationships with retailers.Click to enlargeAnother likely response is an acceleration of digital-only releases. While PC games on discs have been nearly nonexistent for years in most regions (oddly, my last physical PC game was Ghostwire: Tokyo, which launched in 2022), full-priced digital-only console games remain rare.Despite a significant shift toward digital spending on consoles physical game sales have halved since 2021 many players still prefer owning discs they can trade or lend to friends.A rare exception was Alan Wake 2, which launched without a physical edition in 2023. However, Remedy mitigated backlash by pricing the digital console versions at $59.99 instead of the now-standard $69.99 and keeping that price for the 2024 physical deluxe edition. The PC version remains at $49.99, but few expect other publishers to be as consumer-friendly if they transition to digital-only releases.Moving disc manufacturing back to the U.S. would be costly and time-consuming. Given the ongoing decline in retail game sales, many publishers may see little incentive to make that investment further reinforcing the industry's gradual move away from physical media.