Warren Buffett has called tariffs “an act of war” in a recent interview with CBS News. The billionaire investor said tariffs act as a tax on goods and raise prices for consumers. “The tooth fairy doesn’t pay ’em!” Buffett said.
He explained that the costs from tariffs are usually passed on to consumers through higher prices. Buffett shared his thoughts as the Trump administration prepared to impose a 25% tariff on goods from Canada and Mexico. The administration also plans to raise tariffs on Chinese goods from 10% to 20%.
These actions have raised concerns among economists about increased costs for U.S. consumers and potential inflation. The European Union and other trading partners have also been targeted by President Trump’s tariff plans. This has escalated fears of a broader trade war.
Commerce Secretary Howard Lutnick dismissed Buffett’s comments. Lutnick suggested that tariffs could replace the need for the Internal Revenue Service (IRS). However, he inaccurately claimed that the IRS was established during World War I.
In fact, it was created during the Civil War
Buffett critiques tariff impacts
The federal income tax has been the government’s largest source of revenue since 1913.
This underscores the impracticality of relying solely on tariffs for funding. Buffett also touched upon the historical context of tariffs. He highlighted their protectionist nature.
The Smoot-Hawley Tariff Act of 1930, for instance, exacerbated the Great Depression and drew international condemnation. When asked about the general state of the economy, Buffett described it as the “most interesting subject in the world.” However, he refrained from further comment. Berkshire Hathaway has amassed a record $334.2 billion in cash and cash equivalents in the fourth quarter.
This reflects Buffett’s cautious approach in the current market environment. Despite selling stocks in companies like Apple and Bank of America, Berkshire’s operating earnings and share prices have reached record highs. Buffett emphasized his long-term faith in the U.S. economy.
He stated, “Most of the money I manage will always be in the United States. It’s the best place. I was lucky to be born here.”
As the tariff debate continues, Buffett’s seasoned perspective offers a sobering reminder of the potential economic implications.
Image Credits: Photo by Randy Fath on Unsplash
