'The Tooth Fairy doesn't pay 'em!': Warren Buffett weighs in on tariffs and their potential impact on the US economy as Trump slaps them on Canada, Mexico

The “Oracle of Omaha” wasn’t exactly silent about Trump’s trade decisions during his first term, voicing his concerns about global consequences. When he recently sat with O’Donnell, Buffet called tariffs “an act of war, to some degree.”

“Over time, they are a tax on goods. I mean, the tooth fairy doesn’t pay ’em! And then what? You always have to ask that question in economics. You always say, ‘And then what?’”

What the tariffs mean

Mexico and Canada are facing staggering tariffs, with China facing its own import fee. Citing illegal immigration, drug trafficking and trade deficits, Trump is hoping the tariffs will pressure trade partners to curb those challenges while incentivizing U.S. manufacturing by making foreign goods more expensive. China responded with immediate tariffs on U.S. farm exports, and Mexico and Canada have responded in kind, imposing their own tariffs on American goods.

In an interview with Fox News, Trump was asked whether he thought a recession — fueled in part by the tariffs — was imminent: “Look, we’re going to have disruption,” he said, “but we’re OK with that.”

Buffett, known for his plainspoken economic wisdom, sees tariffs as a hidden tax on American consumers. When governments impose tariffs, they raise the cost of imported goods, forcing businesses to either absorb those costs, reducing profit margins, or pass them on to consumers.

His point? There’s no magic solution to trade deficits or economic competition — somebody always pays. And in this case, it’s not the government or foreign exporters footing the bill. It’s American companies and families.

Buffett has long been a critic of policies that disrupt free trade. He’s argued that tariffs:

• Increase prices for everyday goods: Many industries rely on imported raw materials, and higher costs mean consumers pay more for cars, appliances, and even groceries.
• Disrupt supply chains: Many U.S. companies depend on materials from Canada and Mexico. Tariffs force businesses to either eat the costs or find new suppliers, which isn’t always feasible.
• Trigger retaliation: As Mexico, Canada and China have shown, other countries won’t sit back while tariffs pile up against them. Retaliation will impact American farmers, manufacturers, and retailers.

Higher consumer costs

The impact of tariffs isn’t limited to a handful of industries. It reaches across the entire economy, affecting consumers, businesses and financial markets.

One of the most immediate effects is higher prices for everyday goods. American manufacturers rely heavily on materials like steel and aluminum from Canada and Mexico, and if those imports become more expensive, the costs ripple out the supply chain. That could make products like cars, appliances, and electronics pricier for consumers.

For businesses, the pressure can be twofold, as they bear the impact from both sides of the border. Many U.S. companies depend on cross-border trade to keep costs down, and any disruption forces them to adjust pricing, reduce profits, or find alternative suppliers, which isn’t always possible.

Automakers are particularly vulnerable since they source parts from Mexico and Canada. With tariffs in place, they either have to pay more for those parts or shift production, both of which could lead to job cuts or higher car prices.