Warren Buffett Warns Against Trade Weaponization Amid Market Volatility

At the 2025 Berkshire Hathaway annual shareholder meeting, Warren Buffett delivered a sharp critique of protectionist trade policies, framing tariffs as “economic weapons” that risk destabilizing global growth. The event, a cornerstone of capitalist discourse, underscored the Oracle of Omaha’s longstanding advocacy for free trade—a stance now tested by geopolitical tensions and shifting economic tides.

Buffett’s Case Against Trade as a Political Tool

Buffett’s remarks were unequivocal: “Trade wars are a big mistake,” he declared, addressing President Donald Trump’s aggressive tariff policies. He argued that tariffs disrupt the “comparative advantage” principle, forcing nations to prioritize political agendas over economic efficiency. This philosophy aligns with Berkshire’s investment strategy, which seeks undervalued assets globally—whether in insurance, railroads, or consumer goods.

The CEO’s warnings carry weight: tariffs on Chinese imports, energy disputes, and supply chain bottlenecks have already impacted Berkshire’s bottom line. First-quarter operating profit fell 14.1% year-over-year to $9.64 billion, with its insurance segment—once a profit engine—slumping 49% to $1.33 billion. The underwriting decline, Buffett noted, reflected both market volatility and the indirect costs of trade uncertainty, such as higher reinsurance pricing.

Navigating Volatility with a Record Cash Pile

Despite the headwinds, Berkshire’s cash reserves hit a record $347.7 billion—a buffer Buffett calls “insurance against the unknown.” This liquidity allows the conglomerate to capitalize on market dips, a tactic it has used for decades. While the S&P 500 fell 3% in early 2025, Berkshire’s stock surged 18%, outperforming as investors flocked to its perceived stability.

Buffett’s confidence in equities remains undimmed. In his shareholder letter, he emphasized that “the great majority of your money remains in stocks,” a stance he reiterated at the meeting. This reflects a belief that long-term equity returns will outweigh short-term geopolitical noise—a view supported by Berkshire’s 18% YTD gains versus the broader market’s decline.

The Trade Policy Risk Factor

Berkshire’s Q1 report explicitly listed trade policy shifts as a material risk. The company warned that “changes in international trade policies” could negatively impact its investments and operations. This is no abstract concern: tariffs on steel and aluminum, for instance, have increased costs for Berkshire’s railroad and manufacturing divisions.

The broader economic stakes are clear. The International Monetary Fund (IMF) estimates that a full-scale trade war could reduce global GDP by 0.5% annually—a drag that would ripple through sectors Berkshire operates in, from energy to consumer goods.

Conclusion: Free Trade as a Long-Term Imperative

Warren Buffett’s 2025 meeting remarks crystallize a critical truth: protectionism exacts an economic toll, even for the world’s most resilient enterprises. Berkshire’s 14.1% Q1 profit decline and its explicit acknowledgment of trade risks underscore the fragility of global supply chains. Yet its record cash reserves and equity-focused strategy also reveal a path forward—diversification, patience, and an unwavering belief in free markets.

For investors, the message is clear: while short-term volatility may persist, long-term gains hinge on avoiding “economic warfare” through trade. As Buffett’s 18% stock outperformance this year shows, capitalizing on chaos requires both liquidity and the wisdom to look past the noise. In a world of rising tariffs, the Oracle’s advice is as timeless as it is urgent: “Do what you do best—and let others do the same.”

Data Note: Berkshire Hathaway (BRK.A) and S&P 500 (SPX) performance figures reflect year-to-date changes as of May 2025.