“Tariffs are, in a way, an act of war—we’ve had plenty of experience with them,” Warren Buffett said in a CBS interview that aired Sunday.
The Berkshire Hathaway CEO and billionaire investor explained that tariffs function as a tax on goods, ultimately leading to higher prices for consumers.
“The Tooth Fairy doesn’t pay ‘em!” Buffett joked.
Tariffs disrupt trade by increasing costs on imported goods, often passing those expenses onto consumers. Many economists view them as a political tool—sometimes a weapon in trade wars—rather than an effective strategy for global commerce.
Buffett shared his perspective during a rare interview with CBS News’ Norah O’Donnell. While the segment primarily focused on the late Katharine Graham, former Washington Post publisher and Buffett’s longtime friend, he also weighed in on the economy.
The Oracle of Omaha emphasized the importance of asking, “And then what?” when considering the consequences of tariffs and who ultimately pays the price.
“In economics, you always have to ask that question: ‘And then what?’” Buffett said.
President Trump is moving forward with tariffs on the U.S.’s largest trading partners, set to impose a 25% tariff on goods from Canada and Mexico starting Tuesday. On Monday, he also increased tariffs on Chinese imports from 10% to 20%.
The Trump administration has wavered on its tariff plans, leaving uncertainty about their final scope. Economists warn that tariffs will likely drive up costs for U.S. consumers on everyday goods that depend on global supply chains, from electronics to vehicles. These proposals come at a time of declining consumer confidence and lingering inflation concerns.
China has retaliated with its own tariffs, raising fears of another trade war reminiscent of Trump’s first term. This time, the European Union and other trading partners are also in the crosshairs, as Trump pushes for “reciprocal tariffs” on countries that impose tariffs on U.S. goods.
During an interview on The Situation Room with CNN’s Pamela Brown on Monday, Commerce Secretary Howard Lutnick dismissed Buffett’s comments on tariffs as “silly.”
Lutnick went on to suggest that tariffs could eliminate the need for the Internal Revenue Service—incorrectly claiming the agency was created when the U.S. entered World War I.
Before 1913, the United States primarily relied on tariffs for revenue. However, during World War I, Americans were called to contribute financially, leading to the expansion of the Internal Revenue Service (IRS), Lutnick claimed.
In reality, the origins of the IRS date back to 1862, when it was created during the Civil War. The federal income tax, which the IRS collects, was established in 1913 with the ratification of the 16th Amendment—four years before the U.S. entered World War I. Since then, federal income tax has become the government’s largest source of revenue.
While it’s true that tariffs once funded much of the government, the U.S. economy has vastly evolved since the late 19th and early 20th centuries. In today’s globalized economy, relying solely on tariffs is neither practical nor financially viable. The idea of abolishing the IRS and replacing income tax with tariffs is not only unrealistic but fraught with economic challenges.
While Buffett didn’t expand on his remark about tariffs being an act of war, they have long been linked to protectionist trade policies that can drive isolationist foreign policy. In the 1930s, after the U.S. implemented steep tariff increases under the Smoot-Hawley Tariff Act of 1930—worsening the Great Depression—French media reportedly referred to it as a declaration of economic war.
Buffett has been vocal about the downsides of tariffs in the past. In 2016, he criticized Trump’s proposed tariffs during the campaign, calling them “a very bad idea.”
When asked by O’Donnell for his thoughts on the state of the economy, Buffett called it the “most interesting subject in the world” but declined to elaborate.
Buffett, whose insights are closely followed by investors, has drawn attention over the past year as Berkshire Hathaway’s cash reserves have soared.
In the fourth quarter, Berkshire’s cash and cash equivalents reached a record $334.2 billion—nearly doubling from $167.6 billion the previous year. The company built up its cash position while selling shares in major blue-chip stocks like Apple (AAPL) and Bank of America (BAC), fueling speculation about Buffett’s outlook on the U.S. market.
Despite this cautious positioning, Berkshire’s operating earnings hit an all-time high in the fourth quarter, and both its Class A (BRK.A) and Class B (BRK.B) shares closed at record highs just last week. Buffett reaffirmed his confidence in the U.S. economy, saying that most of the money he manages will remain in the country.
“It’s the best place,” Buffett said. “I was lucky to be born here.”
