Even Warren Buffett warned that America’s trade deficit is ‘selling the nation out from under us’ — and proposed a ‘tariff called by another name.’ Here’s why his fix is better than Trump’s

Buffett’s market-based fix: a ‘tariff called by another name’

Buffett proposed a bold fix: a concept he calls the “Import Certificate” system — a market-based solution to reduce the U.S. trade deficit.

Here’s how it works:

Exporters earn certificates — For every dollar an American company earns by exporting goods or services, it receives an Import Certificate of equal value.

Importers must buy certificates — To bring goods into the U.S., importers must purchase these certificates from exporters.

This effectively limits total imports to the value of exports, achieving trade balance. It also creates a powerful financial incentive to export, since companies can sell their certificates on the open market to importers.

How does Buffett’s idea compare to the sweeping tariffs currently being implemented by Trump?

Buffett himself acknowledged that, “in truth,” his import certificate system is “a tariff called by another name.” But he was quick to note that it avoids the typical pitfalls of traditional tariffs — namely, industry favoritism, geopolitical tension, and the risk of escalating trade wars.

“This is a tariff that retains most free-market virtues, neither protecting specific industries nor punishing specific countries nor encouraging trade wars,” he wrote. “This plan would increase our exports and might well lead to increased overall world trade. And it would balance our books without there being a significant decline in the value of the dollar, which I believe is otherwise almost certain to occur.”

In other words, Buffett’s proposal is designed to nudge markets toward equilibrium — not to punish America’s trading partners.

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‘The best thing to do’ for everyday investors

While Buffett’s solution was never implemented, it’s clear that investors haven’t responded well to Trump’s version. Markets around the world have tumbled in the wake of his tariff announcements, with the sell-off wiping out trillions of dollars in global equity value.

And while headlines are dominated by recession fears and rising geopolitical tensions, Buffett has consistently emphasized one unwavering belief — his confidence in America.

“American business — and consequently a basket of stocks — is virtually certain to be worth far more in the years ahead,” Buffett wrote in his 2016 letter to shareholders.

That same optimism carried through in his 2022 letter:

“I have yet to see a time when it made sense to make a long-term bet against America. And I doubt very much that any reader of this letter will have a different experience in the future.”

When it comes to individual investors, Buffett’s advice is as simple as it is enduring.

“In my view, for most people, the best thing to do is own the S&P 500 index fund,” he famously stated. This straightforward approach gives investors exposure to 500 of America’s largest companies across various industries, providing diversified exposure without the need for constant monitoring or active trading.

The beauty of this approach is its accessibility — anyone, regardless of wealth, can take advantage of it. Even small amounts can grow over time with tools like Acorns — a popular app that automatically invests your spare change.

Signing up for Acorns takes just minutes: simply link your cards, and Acorns will round up each purchase to the nearest dollar, investing the difference — your spare change — into a diversified portfolio. With Acorns, you can invest in an S&P 500 ETF with as little as $5 — and, if you sign up today, Acorns will add a $20 bonus to help you begin your investment journey.

While investing in an index fund is straightforward, some investors may want guidance on building a portfolio tailored to their specific financial goals. That’s where a professional can help.

With Vanguard, you can connect with a personal advisor who can help assess how you’re doing so far and make sure you've got the right portfolio to meet your goals on time.

Vanguard’s hybrid advisory system combines advice from professional advisors and automated portfolio management to make sure your investments are working to achieve your financial goals.

All you have to do is fill out a brief questionnaire about your financial goals, and Vanguard’s advisors will help you set a tailored plan and stick to it.

Once you’re set, you can sit back as Vanguard’s advisors manage your portfolio. Because they’re fiduciaries, they don’t earn commissions, so you can trust that the advice you’re getting is unbiased.