Tariffs might be President Donald Trump’s favorite word. To legendary investor Warren Buffett, there is less to be excited about.
“Tariffs are actually — we’ve had a lot of experience with them — they’re an act of war, to some degree,” Buffett said in an interview with CBS that aired on Sunday.
The Berkshire Hathaway CEO and billionaire investor said tariffs over time serve as a tax on goods and could raise prices for consumers.
“The Tooth Fairy doesn’t pay ‘em!” Buffett said with a laugh.
Tariffs disrupt trade between countries by raising taxes on imported goods, and those new costs are often passed on to consumers through higher prices. Tariffs are considered by many economists a political cudgel — sometimes used in a trade war — and not an efficient framework for international trade.
Buffett offered his thoughts in a rare sit-down interview, with CBS News’ Norah O’Donnell. The segment focused on the late Katharine Graham, former publisher of the Washington Post and a friend of Buffett’s, though he answered a few questions about the economy.
The Oracle of Omaha said it’s critical to ask, “And then what?” when thinking about the implications of tariffs and who will bear the cost.
“You always have to ask that question in economics: Always say, ‘And then what?’” Buffett said.
Trump is set to go ahead with tariffs on America’s three biggest trading partners on Tuesday, imposing 25% tariffs on goods from Canada and Mexico and hiking tariffs implemented on China.
The Trump administration has gone back and forth on its proposed tariff plans. Economists expect tariffs to increase the cost for US consumers on everyday goods that rely on international supply chains, from electronics to vehicles. Trump’s tariff proposals also come at a time when US consumer confidence is declining and concerns of inflation are lingering.
China has hit back at the United States with its own tariffs, stoking concerns of a trade war similar to Trump’s first term. And this time, the European Union and other trading partners are also targets, with Trump outlining a plan for “reciprocal tariffs” on countries that have tariffs on US goods.
While Buffett didn’t elaborate on his comment about tariffs being an act of war, tariffs have long been associated with protectionist trade policy that has influenced isolationist foreign policy. In the 1930s, after the United States hiked tariffs as part of the Smoot-Hawley Tariff Act of 1930 (which exacerbated the Great Depression), the French media reportedly called it a declaration of (economic) war.
Buffett has previously been outspoken about the negative effects of tariffs. In 2016, he said Trump’s proposals for tariffs on the campaign trail were “a very bad idea.”