Berkshire's Buffett Warns: Trade Wars Are Economic Blunders

At the 2025 Berkshire Hathaway annual meeting, Warren Buffett delivered a stark warning against using trade as a geopolitical weapon, framing tariffs as a “net negative” for global economic stability. His remarks, delivered to a record crowd of 19,700 investors, underscored the fragility of supply chains and the tangible costs of protectionist policies—a theme that resonates deeply with Berkshire’s operations.

The Tariff Toll on Berkshire’s Bottom Line

Buffett’s critique was rooted in hard numbers. Berkshire’s Q1 2025 operating earnings fell 14% year-over-year to $9.64 billion, with its insurance underwriting business—Berkshire’s profit engine—slumping nearly 50% to $1.33 billion. Analysts attribute this decline to macroeconomic pressures exacerbated by tariff-driven disruptions.

The pain is felt across Berkshire’s portfolio. Furniture retailer Nebraska Furniture Mart faces rising material costs, while Geico grapples with pricier imported auto parts. Even BNSF Railway, the company’s logistics backbone, risks reduced container volumes if consumer demand weakens further. These challenges highlight how tariffs, intended to “protect” industries, instead create cascading inefficiencies.

Cash Reserves: A Buffer, Not a Panacea

Berkshire’s $347 billion cash hoard—a record high—has sparked speculation about potential acquisitions amid market volatility. Yet Buffett remains cautious, warning that tariffs’ uncertainty complicates strategic moves. “You can’t invest in chaos,” he noted, emphasizing the need for long-term patience.

The cash pile, while impressive, is no guarantee of immunity. Buffett’s focus on “moats” and durable businesses suggests he views tariffs as a temporary headwind rather than a structural crisis. However, the sheer scale of the reserves underscores his belief that dislocations caused by trade wars could eventually present opportunities—for those with the patience to wait.

Trade as a Weapon: The Geopolitical Gamble

Buffett’s most provocative statement likened trade wars to “acts of war,” a metaphor that drew applause from shareholders. His critique aligns with historical data: protectionist policies, such as the Smoot-Hawley Tariff Act of 1930, often deepen economic downturns.

While Buffett did not name the Trump administration, his timing was notable. The remarks came as the U.S. faces escalating trade tensions, with tariffs contributing to a 7.2% annualized contraction in global trade volume in early 2025. For Buffett, the lesson is clear: trade should be a bridge, not a battering ram.

Conclusion: The Long Game of Economic Realism

Buffett’s analysis is a masterclass in economic realism. By linking Berkshire’s financial struggles to trade policies, he illustrates how protectionism harms both corporations and consumers. The data is damning:

• Berkshire’s Q1 underwriting profits dropped 50%, a stark indicator of tariff-driven inefficiencies.
• Global trade volume contracted 7.2% in early 2025, reflecting broader market disarray.
• Berkshire’s cash reserves, while massive, have grown at a slower rate (4% annually since 2020), suggesting fewer high-quality investment opportunities.

For investors, the takeaway is twofold: first, tariffs distort markets and erode corporate margins; second, long-term success demands resilience and a focus on fundamentals. As Buffett put it, “You pay a heavy price for certainty in uncertain times.” In an era of geopolitical brinkmanship, that certainty is a luxury few can afford.

The Oracle of Omaha’s message is clear: trade wars may offer fleeting political victories, but their economic costs are enduring—and avoidable.