Tariffs have long been a contentious issue in global trade policy, often serving as a tool for economic protectionism. However, legendary investor and Berkshire Hathaway CEO Warren Buffett has a stark view on the subject. In a recent interview with CBS, Buffett described tariffs as “an act of war, to some degree,” emphasizing their disruptive nature in international trade. His remarks have reignited discussions about the long-term economic impact of tariffs, particularly as the U.S. government under President Donald Trump continues to implement and expand its tariff policies.
Buffett, known for his pragmatic and deeply analytical approach to economics, explained that tariffs ultimately function as an indirect tax on consumers. While they may be framed as protective measures for domestic industries, the added costs are typically passed down through the supply chain, leading to higher prices on goods. “The Tooth Fairy doesn’t pay ’em!” Buffett quipped, illustrating the fundamental reality that tariffs do not operate in a vacuum—someone, somewhere, has to absorb the cost.
Tariffs are, in essence, duties imposed on imported goods, making foreign products more expensive and ostensibly encouraging the consumption of domestically produced alternatives. However, many economists argue that such measures create inefficiencies in the market and can provoke retaliatory actions from trading partners, escalating into full-scale trade conflicts. The Trump administration has been particularly aggressive in its application of tariffs, targeting major trading partners such as China, Canada, and Mexico. On Tuesday, the White House moved forward with a 25% tariff on Canadian and Mexican goods, while also raising existing tariffs on Chinese imports from 10% to 20%. These moves have heightened tensions between the U.S. and its global economic counterparts, fueling fears of a prolonged trade war.
Buffett’s remarks came during a rare sit-down interview with CBS News’ Norah O’Donnell, in which he discussed various economic issues. While the primary focus of the interview was Katharine Graham, the late Washington Post publisher and Buffett’s close friend, the conversation also touched on his views on tariffs and the broader economic landscape. Buffett underscored the importance of asking, “And then what?” when evaluating economic policies. “You always have to ask that question in economics: Always say, ‘And then what?’” he said, emphasizing the necessity of considering the long-term consequences of trade restrictions.
The economic ramifications of tariffs extend far beyond their immediate impact on pricing. They disrupt global supply chains, create market uncertainty, and can contribute to inflationary pressures. The Trump administration’s tariffs come at a time when consumer confidence in the U.S. is showing signs of weakening, and inflation remains a persistent concern. Analysts warn that higher import costs could translate to increased prices on everyday goods, including electronics, automobiles, and household necessities—placing a burden on American consumers.
China, one of the primary targets of Trump’s tariff policies, has already responded with retaliatory measures, raising concerns that a full-blown trade war could ensue. Unlike previous trade disputes, this conflict extends beyond China, as the European Union and other trading partners are also in Trump’s crosshairs. The administration has proposed a system of “reciprocal tariffs,” meaning that any country imposing tariffs on U.S. goods would face equivalent levies on its exports to the U.S.
The debate surrounding tariffs has also taken a political turn, with figures within the administration defending the policy. On Monday, Commerce Secretary Howard Lutnick dismissed Buffett’s comments as “silly” during an interview with CNN’s Pamela Brown on The Situation Room. Lutnick even suggested that tariffs could serve as an alternative to federal income tax, claiming that the Internal Revenue Service (IRS) was only created when the U.S. entered World War I. This assertion, however, is historically inaccurate. The IRS was originally established in 1862 during the Civil War, and the federal income tax became a permanent fixture of the U.S. tax system in 1913 with the ratification of the 16th Amendment—four years before the country entered World War I. While it is true that tariffs once served as a primary source of federal revenue, the structure of the modern global economy is vastly different from that of the late 19th and early 20th centuries, making such a proposal financially unviable.
Buffett’s assertion that tariffs are an “act of war” aligns with historical perspectives on protectionist trade policies. The Smoot-Hawley Tariff Act of 1930, for instance, significantly raised U.S. tariffs on imported goods, prompting retaliatory tariffs from other nations. The act is widely regarded as a contributing factor to the severity of the Great Depression. At the time, the French press even referred to the legislation as a declaration of “economic war,” reinforcing the idea that tariffs often lead to heightened geopolitical tensions.
Buffett has been vocal about his opposition to tariffs in the past. In 2016, he publicly criticized Trump’s proposed tariff policies, calling them “a very bad idea.” His stance is rooted in his deep understanding of market dynamics and the interconnected nature of global trade. As one of the most respected voices in finance, his opinions carry significant weight, particularly among investors who closely monitor his moves.
Beyond his views on tariffs, Buffett has been making headlines for his investment decisions. Over the past year, Berkshire Hathaway has amassed a record cash reserve, reaching $334.2 billion in the fourth quarter—up from $167.6 billion the previous year. At the same time, Berkshire has been selling off shares in blue-chip companies like Apple and Bank of America, sparking speculation about Buffett’s outlook on the market. Despite these divestments, he remains confident in the U.S. economy. “It’s the best place,” he said. “I was lucky to be born here.”
Buffett’s remarks serve as a reminder that economic policies have far-reaching implications that must be carefully considered. While tariffs may be politically expedient, their long-term effects on trade, inflation, and consumer prices cannot be ignored. As the global economy continues to evolve, the debate over protectionism versus free trade remains as relevant as ever.
