Warren Buffett calls new US tariffs an "act of war" as Trump’s aggressive trade policies threaten global economic stability.
The sage of Omaha, Warren Buffett, has said that the new US tariff regime is an “act of war”.
President Donald Trump has unleashed a trade war on the world — including against India on which reciprocal tariffs will kick in on April 2 — that will have shocking effects not only on the countries on his target list but reverberate globally.
Economic wisdom has it that tariffs will hurt the world, including the US where the inflation could run away to double the current three per cent to six per cent. Trump’s logic of using tariffs only to stop illegal immigrants and the opioid agonist Fentanyl does not cut ice. As costs of imported goods will rise thanks to tariffs, US producers of the same goods may use the opportunity to raise their prices.
The argument that this serious round of imposition of tariffs, from Canada, Mexico and China and leading to the EU and India, is only a negotiating ploy to stop immigrants and drugs is specious. While overdose deaths from opioids are also coming down in the US, what cannot be ignored is the restricting of immigrants and ousting of illegal residents will see wages rise and consequently push up prices as the labour market contracts.
Impressive as it may have seemed when it played out on the Capitol, the dramatics of the longest presidential speech to Congress received mixed responses with the Democrats turning their backs on Trump with T-shirt slogans reading ‘Resist’ or greeting him with “Musk steals” and “False”. The Democrats were reduced to the role of an insipid opposition while pointing out that if America wants change, there are responsible ways to make it happen.
The reality is that the US national debt will increase in Trump’s second term and higher deficits mean more pressure on prices and interest rates. Trump said he had inherited “an economic catastrophe” and “inflation nightmare” through rising energy costs from the Biden regime, but high tariffs may lead to even more of it.
It is, of course, blatantly unfair if India imposes 100 per cent or more on automobile imports while the US may charge under three per cent. The fact is inequitable trade policies have existed for a long time but is blanket retribution with reciprocal rates the solution? Already, US consumer confidence has been drooping with inflation, especially in the post-Covid years as everyone save the super rich are feeling the pinch of the rising cost-of-living index.
The fear is more as Trump, boasting on primetime annual address to Congress to talk up his achievements, stressed that his administration “is just getting started.” Hitting out at the ‘woke’ empire that Joe Biden and his Democrats built with their emphasis on diversity, equity and inclusion policies may be an internal matter that will affect mostly Americans and those who benefited from shady overseas aid programmes. But a global tariff war will be entirely Trump’s doing.
China and Canada are lining up to retaliate and India would have to take measures to keep the losses down while looking for other opportunities if the US is serious in developing ties with India as a counterweight to China. Thus far it was mostly bluster but now that the seriousness of tariffs is becoming apparent, all countries would have to look at alternatives in
their own trade deals.
How far Trump will allow his stated territorial acquisitiveness vis-a-vis Greenland, the Panama Canal and Canada, and bluster on countering China’s eye on Taiwan or, in greater extremity, Vladimir Putin’s invasion of Ukraine, translate into action remains to be seen.
Ukrainian President Volodymyr Zelenskyy signing a minerals deal might stave off a greater crisis for cash-strapped Ukraine. But let it be said that Trump in 45 days has done more to shake up the world than even some authoritarians have in 80 years since World War II.
