Warren Buffett doesn't usually like to talk about the "macro" stuff. He’d much rather dig into the balance sheet of a candy company or a furniture store than obsess over the Federal Reserve's latest mood swings. But when you start talking about a trade war, the 95-year-old billionaire starts sounding a lot more like a concerned general than a quiet investor. He's called tariffs an "act of war" more than once. Honestly, he’s not kidding.
You’ve probably heard people argue that trade wars are easy to win. Buffett disagrees. Deeply. To him, the global economy is a giant, interconnected web where everything touches everything else. You pull one string in Beijing or Ottawa, and suddenly a mom in Omaha is paying twenty bucks more for her kid's sneakers. He basically looks at the whole thing as a dangerous game of "and then what?"
Why Warren Buffett on Trade War Warnings Actually Matter
Buffett’s biggest beef with trade wars is that they are essentially a tax on the person buying the goods. He’s famous for saying that "the Tooth Fairy doesn't pay" for tariffs. If a company has to pay a 25% tax to bring a part into the country, they aren't just going to eat that cost. They’ll pass it to you. Every time.
During the Berkshire Hathaway annual meeting in May 2025, Buffett didn't hold back. He stood in front of 40,000 people and said trade should not be used as a weapon. He thinks it’s a big mistake to try and design a world where one country "wins" and everyone else is left feeling envious or broke. That’s how you get real wars, not just trade ones.
The "Act of War" Comment Explained
When Buffett sat down with CBS News for a documentary on Katherine Graham, he dropped the "act of war" line. It wasn't just a catchy soundbite for the news cycle. He was explaining that once you start retaliating with tariffs, it’s incredibly hard to stop. It’s like a nuclear threat. You put it out there to bring people to the negotiating table, but if someone actually "pushes the button," the fallout is massive.
He’s worried about a cycle of retaliation.
- Country A puts a tariff on steel.
- Country B puts a tariff on soybeans.
- Country A gets mad and taxes cars.
- Suddenly, everyone is poorer and the global supply chain is a mess.
The Squanderville vs. Thriftville Paradox
While Buffett hates the way trade wars are fought, he isn't exactly a fan of the massive U.S. trade deficit either. Back in 2003, he wrote this famous piece for Fortune magazine where he talked about two imaginary islands: Squanderville and Thriftville.
💡 You might also like: Eddie Villalobos San Diego: What Most People Get Wrong
In this story, Squanderville (the U.S.) keeps buying stuff from Thriftville (the rest of the world) using IOUs. Eventually, Thriftville owns the whole island of Squanderville. Buffett thinks this is a real problem. He once proposed something called "Import Certificates" to fix it. It was basically a way to make sure that if you wanted to import a dollar’s worth of stuff, someone else had to export a dollar’s worth of stuff.
It’s a bit of a contradiction, right? He hates tariffs, but he wants to force trade into a balance. That’s the nuance of the Oracle. He likes the free market, but he doesn't like seeing the country's net worth being shipped overseas.
A Nuanced View on China
Buffett and his late partner, Charlie Munger, always took a long-term view on China. They saw the U.S. and China as the two economic superpowers that have to get along. Munger used to say that a "good settlement is better than a lovely world war." They’ve both argued that the benefits of the U.S.-China relationship are so huge that breaking them over trade squabbles is just plain stupid.
Even when things got tense in 2019 and again in early 2025, Buffett kept his money mostly in American businesses. He still says the United States is the "best place" to invest. But he also knows that many of his best businesses, like Apple, rely on global trade to function. If you break the trade link, you break the business.
How It Hits Your Wallet
What most people get wrong about Warren Buffett on trade war news is thinking it only matters to Wall Street. It doesn't. Buffett points out that we don't realize how cheap our clothes and electronics are because of free trade. If we made everything ourselves, the prices would skyrocket.
Think about these specific impacts:
- Inflation: Tariffs are directly inflationary. They raise the price of goods at the border.
- Investment Uncertainty: Businesses don't like to build factories if they don't know what the trade rules will be next month.
- Market Volatility: Every time a new tariff is tweeted or announced, the Dow tends to take a 500-point dive.
What You Should Actually Do Now
If you're worried about how trade tensions are going to affect your portfolio, follow the "Buffett Way" of handling chaos. He doesn't panic. He actually does the opposite.
- Stay in "Good" Businesses: Look for companies that have "moats." These are businesses that can raise their prices if their costs go up without losing all their customers.
- Keep Cash Handy: Berkshire Hathaway was sitting on nearly $350 billion in cash in mid-2025. Why? Because Buffett waits for the "trade war" panic to make stocks cheap.
- Focus on the 10-Year Horizon: Don't sell your stocks because of a headline about a 10% tariff. Ask yourself if the company will still be selling its product in ten years.
- Watch the Educator-in-Chief: Buffett believes leaders need to explain why they are doing what they’re doing. If the logic doesn't hold up, be wary of the economic fallout.
Trade wars are messy. They are unpredictable. And as Buffett says, they are a dangerous game to play with the world's prosperity. The best thing you can do is keep your head down, focus on quality, and remember that "the Tooth Fairy" isn't coming to save your bank account when prices go up.
To prepare your portfolio for ongoing trade volatility, you should review your holdings for heavy reliance on international supply chains and identify companies with the pricing power to withstand inflationary tariff shocks.