Warren Buffett, one of history’s most successful investors, has long warned against the economic dangers of tariffs. His critiques gained renewed attention in 2025 when he labeled Trump’s tariff policies “an act of war” and “a tax on goods” during a CBS interview.
As markets reeled from trade tensions, Buffett’s timeless advice on navigating volatility—“Be fearful when others are greedy, and greedy when others are fearful”—offered a counterpoint to the chaos.
This article explores Buffett’s warnings, the data behind tariffs’ economic impact, and why he views protectionism as a costly misstep. Here is why Warren Buffett thinks Trump’s tariffs are a huge mistake.
1. Tariffs as a Hidden Tax on American Consumers
Buffett consistently criticized tariffs as a covert financial burden on households. In a March 2025 CBS interview, he emphasized that tariffs function as “a tax on goods” over time, dismissing the notion that external forces absorb these costs.
“The Tooth Fairy doesn’t pay ’em!” he quipped, underscoring how consumers ultimately bear the brunt through higher prices. The Yale Budget Lab estimates Trump’s tariffs could raise US consumer prices by 2.3%, costing households an average of $3,800 annually.
For essentials like clothing, tariffs on Southeast Asian textiles may increase prices by 17%. These figures align with Buffett’s warning that tariffs distort markets without addressing underlying trade imbalances.
2. The “Act of War” Mentality: How Tariffs Destabilize Global Trade
Buffett likened tariffs to “an act of war” in his CBS interview, highlighting their potential to ignite retaliatory cycles. This analogy echoes historical missteps like the Smoot-Hawley Act of 1930, which slashed global trade by 65% during the Great Depression.
Trump’s April 2025 tariffs—25% on imports from Mexico and Canada, plus 10% on Chinese goods—triggered immediate market turmoil, with the S&P 500 plunging triggered a 10.5% plunge in the S&P 500 over the next two trading days, erasing approximately $5 trillion in market value.
This marked the index’s worst two-day decline since March 2020. According to the Tax Foundation, retaliatory measures now threaten $330 billion in US exports. Buffett’s critique centers on the cascading consequences: disrupted supply chains, reduced foreign investment, and strained alliances with trade partners.
3. Market Volatility as Opportunity: Buffett’s Contrarian Investing Philosophy
While opposing tariffs, Buffett urges investors to view market panics as opportunities. His 2008 New York Times op-ed, “Buy American. I Am,” advocated purchasing undervalued stocks during crises. This philosophy resurfaced in April 2025 as tariffs sparked a Dow Jones drop of 1,400 points.
In his 2017 shareholder letter, Buffett quoted Rudyard Kipling’s “If you can keep your head when all about you are losing theirs… If you can wait and not be tired by waiting… If you can trust yourself when all men doubt you… Yours is the Earth and everything that’s in it.”
He later advised, “Be fearful when others are greedy, and greedy when others are fearful,” a mantra emphasizing long-term value over short-term chaos.
4. Repeating History: Buffett’s Warning Against Smoot-Hawley-Era Mistakes
Buffett’s reference to Smoot-Hawley underscores his belief that tariffs risk repeating catastrophic errors. The Tax Foundation estimates Trump’s tariffs could reduce US GDP by 0.7%—a drag exacerbated by retaliatory measures.
By contrast, the 1930s tariffs deepened the Great Depression, shrinking global trade and worsening unemployment. Buffett’s skepticism stems from tariffs’ tendency to provoke tit-for-tat policies rather than constructive negotiations.
5. The Tooth Fairy Fallacy: Why Tariffs Aren’t Painless Solutions
Buffett views the idea that tariffs painlessly strengthen economies as a myth. “In economics, you must always ask: ‘And then what?'” he cautioned, pointing to unintended consequences.
The Tax Foundation projects Trump’s tariffs could reduce full-time employment by 142,000 jobs and lower wages by 1.9%. These outcomes contradict claims that tariffs protect domestic industries, instead revealing their role as regressive taxes disproportionately affecting lower-income households.
6. Unintended Consequences: Inflation, Retaliation, and Economic Slowdown
Tariffs’ inflationary pressures are already materializing. Goldman Sachs revised its US recession probability to 45% if tariffs persist, while Morgan Stanley warned of a 60% global recession risk.
Jamie Dimon of JPMorgan noted tariffs “will certainly decelerate growth,” citing potential stagflation. The Asia Society Policy Institute’s Wendy Cutler warned of “significant declines in global economic growth” as trade volumes shrink and businesses delay investments.
7. Contrasting Buffett’s Trade Deficit Solution with Trump’s Approach
Buffett has long argued that trade deficits should be addressed through competitiveness, not protectionism. In a 2003 essay, he proposed “Import Certificates” to balance trade without tariffs.
Under this system, US exporters would receive ICs equivalent to their export value, which importers would then need to purchase to bring goods into the country. This mechanism would cap imports at the level of exports, creating a self-balancing trade framework.
Buffett emphasized that ICs function as “a tariff called by another name” but avoid targeting specific industries or countries. By incentivizing exports and allowing market forces to determine trade flows, the plan aims to reduce the trade deficit without sparking retaliatory measures.
However, Buffett acknowledged that ICs would raise import prices, effectively acting as a consumer tax—a trade-off he deemed necessary to prevent the long-term erosion of US economic sovereignty through unsustainable debt and foreign asset ownership.
Trump’s reciprocal tariffs, by contrast, adopt a zero-sum framework. The Tax Foundation estimates these policies could erase 605,000 US jobs, with sectors like autos (-96,000 jobs) and steel (-29,000 jobs) hardest hit.
8. The Data Behind the Damage: GDP Losses and Household Cost Burdens
Economic models paint a stark picture. The Tax Foundation projects Trump’s tariffs will reduce GDP by 0.7%, rising to 0.8% with retaliation. Households face a dual burden: $1,900 annually from baseline tariffs and $2,100 from the April 2025 “Liberation Day” surcharges. These costs strain disposable incomes, potentially curbing consumer spending—a cornerstone of US economic growth.
9. Misinformation Alert: Debunking False Claims About Buffett’s Stance
In April 2025, Trump shared a video falsely claiming Buffett praised his tariffs as “the best economic moves in 50 years.” Berkshire Hathaway swiftly debunked this: “All such reports are false.” Since March, Buffett has avoided public commentary, refuting viral narratives that misrepresent his nonpartisan economic critiques.
Conclusion
Warren Buffett’s opposition to Trump’s tariffs stems from their inflationary impact, disruption of global trade, and historical precedent for harm. His advocacy for calm during market upheaval reflects a broader philosophy: Economic stability requires foresight, not friction. As tariffs strain households and alliances alike, Buffett’s question—“And then what?”—remains a vital lens for evaluating policies with far-reaching consequences.
Time will tell how this plays out as Trump believes it will rebuild the US industrial and manufacturing sector. Buffett believes it is a huge miscalculated national economic misstep.