By Tae Kim

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Super Cycle. Hi everyone. President Donald Trump's trade war is sparking recession fears for major consumer discretionary categories -- including videogames.

Earlier this month, Nintendo received a lot of media attention when the company announced it was delaying U.S. preorders of the Switch 2 console because of uncertainty over tariffs.

The Japan-based videogame publisher, however, may be more insulated from tariff risk than most other companies. Nintendo fans are likely to pay up even in a difficult economic outlook.

This month, Trump has announced so-called reciprocal tariff rates on goods from dozens of countries, including elevated rates on goods from China and Vietnam. At first blush, that seems like a bad scenario for Nintendo, which manufactures its consoles in Asia and has steadily moved more production from China to Vietnam during the last several years.

While the tariff headlines are scary, the U.S. is roughly just one-third of Nintendo's revenue inclusive of hardware and software. But software is where the profits are made in the gaming industry. Nintendo can incentivize and push digital game downloads, which aren't affected by tariffs on physical goods.

Then there is the console cost. Nintendo had announced the Switch 2 console would start at $449.99. The price increase compared with the current $299.99 Switch disappointed some frugal gamers, leading some skeptics to say the Switch 2 wouldn't be as successful.

I disagree. Even if Nintendo is forced to sell the Switch 2 for $100 or $150 higher, it shouldn't affect sales materially. Gamers know the console will bring them enjoyment for seven to eight years until the next one, so any incremental cost is negligible on a per-year basis.

Videogames are more resilient during a recession because gamers can play a title like Mario Kart for thousands of hours, making it extremely cost-effective on a per-hour basis.

"We tend to think that video games benefit from being a less expensive form of entertainment and thus consumers 'trade-down' from more expensive entertainment options like dining out and vacations," TD Cowen analyst Doug Creutz wrote last week.

Most important, Nintendo got its next console right. The company let me try the Switch 2, along with its launch lineup, at a recent press event in New York City. I came away enamored and extremely enthusiastic.

The hardware feels fantastic in the hand with an gorgeous vivid screen and premium feel. Mario Kart World was a blast to play and will become a killer app for the system. That's extremely good news because Mario Kart 8 Deluxe was Switch's best-selling game at 67 million units sold. I also enjoyed Metroid Prime 4, which had amazing production values, incredibly smooth gameplay at 120 frames per second, and precise mouse-like control.

Nvidia makes the graphics chip for the Switch 2 and says the new console has 10 times the graphics performance of the original Switch. The hardware is also backward compatible and can play current-generation Switch games, giving gamers solace their large investments in software are intact. In all, I'm confident Switch 2 will be a massive blockbuster success.

Ultimately, Nintendo gamers are passionate about the videogame maker's properties and are bound to purchase the sequels for Mario, Zelda, Metroid, and Animal Crossing. Switch 2 is the only place to play those franchises.

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Write to Tae Kim at tae.kim@barrons.com or follow him on X at @firstadopter.

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