'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

What the tariffs mean

Mexico and Canada are facing staggering 25% tariffs, with China facing its own 20% 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 vowed to impose their own tariffs on American goods (and the province of Ontario has gone a step further, threatening to add a 25% tax on electricity exports, in addition to other measures).

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.

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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. Similarly, retailers that import a significant portion of their goods could see tighter profit margins and may be forced to raise prices on store shelves. Farmers also stand to lose. Canada and Mexico are major buyers of U.S. agricultural exports, and retaliatory tariffs could hurt demand for American crops.

Trade wars rarely stop with one round of tariffs. If other countries react by imposing their own trade restrictions, it could escalate into a prolonged economic battle that weakens industries on all sides. Investors typically react negatively to such uncertainty, which could lead to stock market volatility and reduced business confidence.

Potential impact on U.S. jobs

The current presidential administration is emphasizing the importance of American goods and jobs, but Trump’s tariffs are projected to eliminate 223,000 jobs, according to the Tax Foundation.

The White House reported an increase of 10,000 manufacturing jobs in Trump’s first month in office. However, industry experts say this won’t be the case long-term.

"It is not going to create more jobs. It is not going to strengthen the U.S. manufacturing sector. It is going to do the opposite,” Kip Eideberg, vice president of government and industry relations for the Association of Equipment Manufacturers, told WDSU news. "Long-term, we're talking about tens of thousands of jobs lost in the U.S. equipment manufacturing industry.”