The debate over tariffs has long been a defining issue in international trade, shaping the economic strategies of nations and influencing diplomatic relations between global superpowers. While many policymakers frame tariffs as necessary tools to protect domestic industries, others warn that such measures carry serious economic risks. Among the most vocal critics is Warren Buffett, the billionaire investor and chairman of Berkshire Hathaway, who recently issued a stark warning about the consequences of tariff policies. In an interview with CBS News, Buffett described tariffs as “an act of war, to some degree,” a statement that underscores the potential for escalating trade conflicts in an increasingly interconnected world economy.
Buffett’s remarks come at a time when the United States, under the leadership of President Donald Trump, has embraced an aggressive stance on trade policy. The administration has imposed tariffs on goods from key trading partners, including China, Canada, and Mexico, arguing that such measures are necessary to correct trade imbalances and protect American manufacturers. On Tuesday, the White House moved forward with a 25% tariff on Canadian and Mexican goods, escalating tensions with two of the country’s closest economic allies. At the same time, the administration raised tariffs on Chinese imports from 10% to 20%, further straining relations between Washington and Beijing.
Buffett, widely regarded as one of the most influential financial minds of the modern era, has long been a critic of protectionist trade policies. He argues that while tariffs may be promoted as mechanisms to strengthen domestic industries, they function primarily as indirect taxes that increase costs for consumers. Instead of punishing foreign competitors, tariffs raise the prices of imported goods, which ultimately affects everyday Americans. “The Tooth Fairy doesn’t pay ‘em!” Buffett said in his CBS interview, using his signature wit to highlight the reality that someone, somewhere, must bear the cost of these trade barriers.
During the interview, Buffett emphasized the importance of considering the broader implications of economic policies. “You always have to ask that question in economics: Always say, ‘And then what?’” he stated. His concern is rooted in history, as past trade restrictions have often led to unintended economic consequences. Protectionist policies can disrupt global supply chains, slow economic growth, and provoke retaliatory measures from affected nations, leading to prolonged trade conflicts. China has already responded to the Trump administration’s tariffs with countermeasures of its own, raising concerns that the U.S. could become embroiled in an extended trade war. Unlike previous disputes, which primarily involved the U.S. and China, the administration’s latest moves have broadened the conflict to include the European Union and other major trading partners. Trump has outlined plans for “reciprocal tariffs,” meaning that any country imposing duties on American goods will face similar levies on their exports to the U.S.
Despite warnings from economists, the Trump administration continues to defend its aggressive trade policies. Commerce Secretary Howard Lutnick dismissed Buffett’s concerns in an interview with CNN, calling them “silly” and suggesting that tariffs could serve as an alternative to federal income taxes. Lutnick even made the historically inaccurate claim that the Internal Revenue Service (IRS) was created during World War I, ignoring the fact that the agency was actually established in 1862 during the Civil War. The modern federal income tax system was permanently implemented in 1913, years before the U.S. entered World War I. While tariffs were once a major source of government revenue, the structure of the modern economy has evolved significantly, making such a proposal unrealistic.
Buffett’s warning that tariffs are an “act of war” is not without historical precedent. The Smoot-Hawley Tariff Act of 1930, which dramatically raised import duties, is widely regarded as a contributing factor to the Great Depression. At the time, the French media even referred to the legislation as a declaration of “economic war,” reinforcing the idea that tariffs often lead to diplomatic and financial turmoil. Buffett, who has consistently spoken out against trade restrictions, previously criticized Trump’s campaign-era tariff proposals in 2016 as “a very bad idea.”
Beyond his public comments on economic policy, Buffett has made significant financial moves that suggest a cautious approach to the market. Over the past year, Berkshire Hathaway has accumulated a record cash reserve of $334.2 billion, nearly doubling from the previous year’s $167.6 billion. At the same time, the firm has divested from major corporations such as Apple and Bank of America, signaling potential concerns about market stability. Yet despite these shifts, Buffett remains confident in the resilience of the U.S. economy. “It’s the best place,” he said. “I was lucky to be born here.”
Buffett’s insights serve as a powerful reminder that economic policies have long-term consequences. As global trade tensions rise, his words carry weight not only in financial circles but also in the broader discussion of how nations should navigate the complexities of an increasingly interdependent world.
