President Donald Trump’s latest round of tariffs on major US trading partners has sparked concerns about inflation and economic disruption, with legendary investor Warren Buffett weighing in on the potential fallout.
In an interview with CBS News that aired Sunday, Buffett called tariffs “an act of war, to some degree,” drawing from decades of experience in the global economy. The billionaire investor and CEO of Berkshire Hathaway warned that tariffs function as a tax on goods, ultimately leading to higher prices for consumers.
“The Tooth Fairy doesn’t pay ‘em!” Buffett quipped during the interview, emphasizing that the financial burden of tariffs will fall on consumers.
Buffett’s remarks come as Trump moves forward with imposing 25% tariffs on imports from Canada and Mexico, effective Tuesday. The administration has also announced an increase in tariffs on Chinese goods from 10% to 20%, a move that is likely to escalate tensions with Beijing. In response, China has vowed to retaliate with its own tariffs, raising concerns of a renewed trade war.
Economists widely agree that tariffs disrupt international trade and lead to higher costs for businesses and consumers. The Trump administration has presented tariffs as a tool to pressure foreign governments and boost domestic manufacturing, but critics warn that such policies could backfire, especially given the deeply integrated supply chains across North America.
Market reaction and economic concerns
Trump’s tariff announcement sent financial markets into turmoil. The Dow Jones Industrial Average plunged 649 points (1.48%), while the S&P 500 dropped 1.76% and the Nasdaq fell 2.64%. Automaker stocks took a significant hit, with General Motors declining 4% and Ford down 1.7% due to their manufacturing dependencies in Mexico.
The Mexican peso and Canadian dollar also declined in response to the news, while officials in both countries signaled that they were preparing countermeasures. Canadian Foreign Minister Mélanie Joly criticized Trump’s move, calling it “unpredictable and chaotic.”
Trump’s justification
Trump defended the tariffs at a White House event, arguing that they would encourage companies to move production to the U.S. “They’re going to have to have a tariff. So what they have to do is build their car plants, frankly, and other things in the United States, in which case they have no tariffs,” he said.
Commerce secretary Howard Lutnick dismissed Buffett’s concerns, calling them “silly” in an interview on CNN’s The Situation Room. Lutnick went further, suggesting that tariffs could replace the need for the Internal Revenue Service, falsely claiming that the IRS was created when the US entered World War I. In reality, the IRS was established in 1862 during the Civil War, and the modern federal income tax was introduced in 1913.
Despite the administration’s claims, experts argue that shifting government revenue away from income taxes to tariffs would be impractical, given the complexity and scale of the modern US economy.
Buffett’s market moves and long-term outlook
Buffett has historically been critical of tariffs, calling Trump’s past trade policies “a very bad idea.” His recent actions in the financial markets suggest caution about the economic outlook. Over the past year, Berkshire Hathaway has significantly increased its cash reserves, reaching a record $334.2 billion in the fourth quarter while selling off shares of major companies like Apple and Bank of America.
Although Buffett refrained from directly commenting on the economy in his CBS interview, he described it as “the most interesting subject in the world.”
Berkshire Hathaway’s stock has reached record highs, with both Class A and Class B shares surging. However, Buffett’s conservative investment approach has raised speculation that he is preparing for economic uncertainty.
(With inputs from agencies)