Warren Buffett: Trump's Tariffs, a Tax on Goods, and the Tooth Fairy

Warren Buffett, the renowned investor and CEO of berkshire hathaway, recently shared his insights on President Donald Trump's tariff policies, likening them to a tax on goods. In an interview with CBS News' Norah O'Donnell, Buffett expressed his concerns about the potential impact of these tariffs on American consumers and businesses.

Buffett, whose conglomerate Berkshire Hathaway has large businesses in insurance, railroad, manufacturing, energy, and retail, described tariffs as an "act of war, to some degree." He explained that over time, tariffs function as a tax on goods, ultimately passed on to consumers. "The Tooth Fairy doesn't pay 'em!" Buffett said with a laugh, emphasizing the burden placed on consumers.



Last week, Trump announced that sweeping 25% tariffs on imports from Mexico and Canada would go into effect on March 4, with China facing an additional 10% tariff on the same date. China has vowed to retaliate, potentially escalating trade tensions. Buffett's comments mark his first public remark on Trump's trade policies, having previously refrained from commenting on the economy directly.

Buffett's concerns about tariffs are well-founded. In 2018, Trump's tariffs on Chinese goods led to an increase in prices for U.S. consumers, with the U.S. Trade Representative estimating that the tariffs would cost the average American household $831 per year. Additionally, retaliatory tariffs imposed by other countries in response to Trump's tariffs can further increase prices and reduce the availability of imported products. For instance, harley-davidson, an American motorcycle manufacturer, faced significant challenges due to retaliatory tariffs imposed by Europe on its motorcycles.



Buffett's critique of Trump's tariff policies highlights the importance of stable and predictable trade relationships for fostering economic prosperity. The unpredictability of Trump's trade policies can create an environment of uncertainty, making it difficult for businesses and investors to make informed decisions about investments and future planning. This uncertainty can have significant implications for economic growth and market stability, as businesses may be hesitant to invest in new projects or expand their operations due to the uncertainty about future trade dynamics.

In summary, Warren Buffett's insights on Trump's tariff policies serve as a reminder that tariffs can have significant consequences for both businesses and consumers. By framing tariffs as a tax on consumers, Buffett highlights the adverse effects on prices and profits. His concerns about the long-term implications of trade wars and the unpredictability of trade policies underscore the importance of thoughtful and stable trade practices in fostering a healthy economy.