“Buffett Calls Tariffs an ‘Act of War’—Here’s What It Means for Stocks!”
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Berkshire Hathaway’s iconic CEO, Warren Buffett, has labeled tariffs as an “act of war,” warning they could further fuel inflation. The stock market seems to agree, with major indices tumbling after the latest trade war developments.
Following the election, many analysts reassured investors that President Donald Trump’s policies would focus on growth—regulatory rollbacks, not trade wars. However, with tariffs now a key part of his agenda, the market is wiping out its post-election gains. Confirmation that the U.S. will impose 25% tariffs on Canada and Mexico sent stocks plummeting on Monday. The Dow Jones Industrial Average dropped 1.5%, the S&P 500 slid 1.8%, and the Nasdaq Composite plunged 2.6%.
“The Trump honeymoon with the markets is over,” writes Rosenberg Research’s Dave Rosenberg. He highlights that only 8% of S&P 500 stocks are at new 52-week highs—far below the 25% seen in early November. “The major averages have now done nothing since Election Day, a stark contrast to the rally of Trump’s first term,” he adds. Instead of accelerating, the U.S. economy appears to be slowing down.
For those who remember 2018, this isn’t a surprise—tariff uncertainty was a major factor in the S&P 500’s decline during Trump’s first administration. In December, Barron’s warned that stocks might struggle once post-election optimism met reality. That reality seems to be setting in, especially after a rough February for the S&P 500.
“The initial phase of Trump 2.0’s trade policy gave investors a false sense of security, with delayed implementations and soft approaches on China,” explains TS Lombard’s Jon Harrison. “But last week’s chaotic tariff announcements shattered that complacency.”
The White House’s latest move—an additional 10% tariff on China and a firm 25% on Mexico and Canada—has killed hopes of minimal trade disruptions. It also raises concerns that other threats, such as a 25% tariff on the European Union, could become reality.
Tensions with China are particularly concerning. Trump has ordered stricter scrutiny of Chinese investments in certain sectors, potentially reopening settled disputes on accounting standards and U.S. listings for Chinese firms. “China has vowed to retaliate,” warns Harrison, “both against these new trade measures and any future escalations.”
With no clear path to resolution, the markets are bracing for more turbulence ahead.
Markets will have to brace for ongoing volatility as trade negotiations continue to seesaw, adding to broader economic concerns.
“Trade War 2.0 and the uncertainty alone are major headwinds for the S&P 500,” warns Evercore ISI’s Julian Emanuel. Consumer confidence is slipping as inflation persists and government layoffs mount, threatening economic growth. Meanwhile, last week’s rise in jobless claims signals a potential crack in the economy’s foundation.
Timing couldn’t be worse.
“If trade policy triggers a consumer demand shock—assuming current tariff threats are enacted—at a time when U.S. growth is already slowing, the risk of a negative feedback loop increases,” explains 22V Research’s Dennis DeBusschere.
Still, investors shouldn’t panic just yet. While volatility is likely to continue, Evercore’s Emanuel projects the S&P 500 could still end the year higher, possibly reaching 6,800. Barron’s, too, believes the index could post gains despite the current turmoil.
DataTrek’s Nicholas Colas urges investors to take the long view. “American exceptionalism in equity markets is a long-term trend, not a guarantee of short-term outperformance,” he notes. Given the mix of high expectations and policy uncertainty, U.S. stocks are holding up surprisingly well.
That may be true—but to borrow Buffett’s analogy, that doesn’t mean they won’t take a beating before bouncing back. War—what is it good for?