Tariffs have been a cornerstone of President Donald Trump’s economic strategy, aimed at reshaping the global trade landscape and asserting American dominance in international commerce. However, to legendary investor Warren Buffett, tariffs represent a far more concerning reality—one that goes beyond mere economic policy. In a recent interview with CBS News, Buffett characterized tariffs as “an act of war, to some degree,” a statement that underscores the potential for escalating trade conflicts with major U.S. partners.
Buffett, whose financial acumen has made him one of the most influential economic voices of the modern era, did not mince words in his critique of tariffs. He explained that while these trade restrictions are often framed as tools for economic leverage, they function primarily as indirect taxes that burden consumers. Contrary to the notion that tariffs are absorbed by foreign producers, Buffett emphasized that the costs are invariably passed down the supply chain, leading to higher prices for goods in the domestic market. “The Tooth Fairy doesn’t pay ‘em!” Buffett said with a chuckle, driving home the point that consumers, not governments, ultimately bear the financial burden.
As the head of Berkshire Hathaway, Buffett has observed firsthand how tariffs disrupt economic equilibrium. By imposing higher taxes on imported goods, the government introduces inefficiencies that ripple through supply chains, affecting businesses and households alike. The Trump administration has taken an aggressive stance on tariffs, targeting key trading partners, including China, Canada, and Mexico. On Tuesday, the White House moved forward with a 25% tariff on Canadian and Mexican goods, escalating trade tensions with two of America’s largest economic allies. Additionally, tariffs on Chinese imports were raised from 10% to 20%, further straining relations between Washington and Beijing.
In a rare sit-down interview with CBS News’ Norah O’Donnell, Buffett elaborated on the dangers of protectionist policies, emphasizing the importance of considering their long-term impact. “You always have to ask that question in economics: Always say, ‘And then what?’” Buffett said. His words reflect a deep understanding of the cascading effects that trade barriers can have on a globalized economy.
Tariffs have historically been used as economic weapons, capable of triggering retaliatory measures from affected countries. China has already responded with counter-tariffs, raising concerns that the situation could spiral into a prolonged trade war. Unlike previous disputes, which were largely confined to U.S.-China relations, the Trump administration’s latest moves have widened the scope of economic confrontation. The European Union and other key trading partners are now also in Washington’s crosshairs, as Trump has outlined plans for “reciprocal tariffs” against nations that impose duties on American goods.
Despite widespread criticism from economists and business leaders, members of the Trump administration have defended the tariff strategy. Commerce Secretary Howard Lutnick dismissed Buffett’s concerns in a CNN interview, calling them “silly” and suggesting that tariffs could serve as an alternative to federal income taxes. Lutnick went so far as to claim that the IRS was established during World War I, a statement that is historically inaccurate. In reality, the IRS was formed in 1862 during the Civil War, and the modern federal income tax was permanently implemented in 1913 through the ratification of the 16th Amendment—years before the U.S. entered World War I. While tariffs were once a primary source of government revenue, the economic framework of the 21st century has evolved in complexity, making such a proposal unrealistic.
Buffett’s assertion that tariffs are akin to an act of war is not without precedent. In the 1930s, the Smoot-Hawley Tariff Act dramatically raised import duties, exacerbating the Great Depression. At the time, the French media labeled it a declaration of economic war, a sentiment that echoes in today’s global trade disputes. Buffett has long warned against the dangers of protectionist policies, criticizing Trump’s campaign-era tariff proposals in 2016 as “a very bad idea.”
Beyond his public commentary on trade policy, Buffett has made notable moves in the financial markets. Berkshire Hathaway’s cash reserves have reached a record $334.2 billion, nearly doubling from the previous year’s $167.6 billion. At the same time, the company has sold off stakes in major corporations such as Apple and Bank of America, signaling potential concerns about market stability. Yet despite these strategic adjustments, Buffett remains steadfast in his belief in the resilience of the U.S. economy. “It’s the best place,” he remarked. “I was lucky to be born here.”
Buffett’s insights serve as a sobering reminder of the unintended consequences of aggressive trade policies. While tariffs may appear to be a means of protecting domestic industries, their broader implications extend beyond national borders, shaping the global economic landscape for years to come.
