Warren Buffett Calls Tariffs an ‘Act of War,’ Will Hurt U.S. Consumers/ Newslooks/ WASHINGTON/ J. Mansour/ Morning Edition/ Warren Buffett criticized tariffs, calling them an “act of war” and warning they act as a hidden tax on consumers. His comments come as former President Trump moves forward with increased tariffs on major trade partners. Buffett also highlighted the need to consider long-term economic consequences, while Commerce Secretary Howard Lutnick dismissed his concerns.
Tariffs and Trade: Quick Look
- Buffett’s Warning: The billionaire investor stated tariffs are an “act of war.”
- Consumer Impact: Tariffs function as a tax, raising prices on goods.
- Trump’s Tariff Plans: New 25% tariffs imposed on Canada and Mexico.
- China’s Response: Retaliatory tariffs raise concerns of a trade war.
- Commerce Secretary’s Take: Lutnick dismissed Buffett’s concerns, suggesting tariffs could replace the IRS.
- Historical Context: Tariffs were once the primary U.S. revenue source but are no longer viable.
- Buffett’s Market Moves: Berkshire Hathaway has built a record $334.2 billion cash reserve.
Warren Buffett Calls Tariffs an ‘Act of War,’ Will Hurt U.S. Consumers
Tariffs, Trade, and Economic Uncertainty: A Deep Look
Buffett Sounds the Alarm on Tariffs
Legendary investor and Berkshire Hathaway CEO Warren Buffett issued a strong warning about the economic consequences of tariffs, labeling them as an “act of war.” In an interview with CBS, Buffett emphasized that tariffs effectively function as a tax, leading to increased prices for consumers.
He quipped, “The Tooth Fairy doesn’t pay ‘em!”—highlighting that the costs ultimately fall on ordinary Americans.
Buffett’s remarks come as former President Donald Trump prepares to impose new tariffs on major trading partners, escalating tensions with Canada, Mexico, China, and the European Union. Trump’s latest tariffs include a 25% tax on goods from Canada and Mexico, along with a hike from 10% to 20% on certain Chinese imports.
The Economic Reality of Tariffs
While tariffs are often presented as a tool to protect domestic industries, they disrupt global supply chains and can drive up costs for businesses and consumers. Many economists argue that tariffs are more of a political tool than an effective economic strategy.
Buffett emphasized the need for a long-term perspective when considering tariffs, urging policymakers to always ask, “And then what?” This question, he explained, is fundamental in economics and critical for understanding the true impact of tariffs on the U.S. economy.
Trump’s Trade War Redux?
Trump’s tariffs have reignited concerns of a trade war similar to the one seen during his first term. China has already responded with retaliatory tariffs, and the European Union is preparing for potential countermeasures. Trump’s new plan also includes “reciprocal tariffs” on countries that impose tariffs on U.S. goods, further escalating tensions.
The timing of these tariffs is notable, as U.S. consumer confidence is already declining and inflation remains a concern. Economists warn that higher tariffs could lead to increased prices for essential goods, from electronics to automobiles, further straining American households.
Commerce Secretary Dismisses Buffett’s Concerns
In response to Buffett’s comments, Commerce Secretary Howard Lutnick dismissed the warnings, calling them “silly.” Lutnick suggested that tariffs could serve as a replacement for the IRS, arguing that the U.S. relied on tariffs as its primary source of revenue before 1913.
However, his historical claim was incorrect. While tariffs once played a significant role in government revenue, the IRS was established in 1862 during the Civil War. The federal income tax, which became the primary revenue source, was introduced in 1913, four years before the U.S. entered World War I.
Economists widely agree that relying solely on tariffs for government funding in today’s globalized economy is unrealistic. The U.S. economy has evolved far beyond its 19th-century structure, making such a proposal impractical.
Tariffs as Economic Warfare?
Buffett did not elaborate on why he referred to tariffs as an “act of war,” but history offers some context. Protectionist trade policies have often led to international conflicts and economic downturns. The Smoot-Hawley Tariff Act of 1930, which imposed steep tariffs on imports, worsened the Great Depression and led to economic retaliation from other countries.
During that period, French newspapers even described U.S. tariffs as a declaration of “economic war.” Buffett’s warning suggests he sees parallels between past trade policies and the current tariff strategies being proposed.
Buffett’s Market Moves Signal Caution
Buffett’s stance on tariffs is further underscored by his recent investment decisions. Over the past year, Berkshire Hathaway has amassed a record-breaking $334.2 billion in cash and cash equivalents. This massive cash reserve, nearly double the previous year’s amount, signals Buffett’s cautious approach to the current economic environment.
Berkshire has also sold off shares in major blue-chip companies, including Apple and Bank of America, raising questions about Buffett’s outlook on the U.S. stock market. However, he remains confident in the U.S. economy in the long run, stating, “It’s the best place. I was lucky to be born here.”
Conclusion
Buffett’s warning about tariffs serves as a reminder of their long-term economic consequences. While Trump’s tariff plans are aimed at reshaping global trade, history suggests they could lead to higher consumer costs, strained international relations, and economic instability. As Buffett continues to accumulate cash and step back from major investments, investors and policymakers alike are paying close attention to his cautious approach.
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