Some suspect that Sony is importing at an even higher price than the retail US price. No one knows for sure, but clever US sellers were buying PS4 at full retail price, shipping to Brazil, paying all taxes, and still they were able to sell cheaper than the retail price of the Brazilian PS4.
If Sony produced PS4 in Brazil they would pay 6% taxes instead of the 40% protection tariff. Microsoft (actually Foxconn) is doing exactly that in Brazil and that's why the XBox One is actually cheaper than a PS4.
Sony simply did not want to incur the labor costs and risks associated with investing in the local tech industry. Nothing wrong with that (it's their decision), but they are not being truthful to the local consumer.
[1] (in portuguese) http://info.abril.com.br/games/noticias/2013/10/sony-divulga...
You can't expect them to set up a factory in every single geopolitical location that imposes these rules.
PS4s are a luxury, but when we apply the same logic to necessities then that argument falls on its face fairly quickly.
Tariffs are also susceptible to political wrangling, where taxes are levied selectively.
> PS4s are a luxury, but when we apply the same logic to necessities then that argument falls on its face fairly quickly.
So let's only apply it to non-necessities. We already have higher taxes on some luxuries, what would happen if we implemented them as import tariffs rather than sales tax?
In fact, you can use the tariff to finance the income subsidies, and it will work at some tariff level as long as the right proportion of the market for that good is not receiving the subsidies.
Further, the industry growth prompted by the tariff is likely to disproportionately help those the income subsidy would be targeting. You'll notice the market for unskilled labor in the US is not exactly thriving.
The political economy argument is more compelling, but in practice "free trade" ends up being anything but. International trade agreements usually take the form of market access conditioned on the kinds of regulation friendliest to the most politically influential (~largest) actors. This is how you get, eg, "free trade" agreements that massively strengthen copyright regimes, to the benefit of "original" content producers and the detriment of content remixers and consumers.