The High Cost of Tariffs — and Why Warren Buffett Isn’t Worried About the Long Haul

Six months into President Trump’s return to office, the effects of his economic policies are starting to register in federal data. A chaotic tariff rollout is beginning to filter through to consumer prices, and immigration crackdowns are weighing on job growth, particularly in industries dependent on unauthorized labor. While these shifts haven’t derailed the broader economy, economists see lower recession risk than three months ago.

June’s inflation report showed an annual rate of 2.7%, aligning with expectations, as reported by The Wall Street Journal.“Today’s report showed that tariffs are beginning to bite,” wrote Omair Sharif of Inflation Insights. UBS analysts warned that without a pullback in tariffs or a recession, inflation likely won’t return to April’s 2.3% rate before 2027.

The foreign-born labor force has shrunk since March, and immigration enforcement appears to be slowing job gains. Employment growth is weakening in sectors that often rely on undocumented workers, with new immigrants increasingly reluctant to respond to federal labor surveys. Despite these headwinds, Americans are still spending and major banks like JPMorgan have reported strong earnings. “The consumer basically seems to be fine,” said CFO Jeremy Barnum.

Still, uncertainty looms. Americans now face a 20.6% average effective tariff rate, the highest since 1910, according to the Yale Budget Lab, which estimates the price hikes could cost households the equivalent of $2,800 annually.

White House officials dispute that tariffs will significantly impact consumers. Trump himself described inflation as “very low” and again urged the Federal Reserve to cut interest rates. And despite concerns over policy inefficiencies, some analysts remain confident. “There’s a lot of ability for the economy to preserve its [overall performance], even when there’s inefficient policy somewhere,” said Alan Cole of the Tax Foundation.

“In the near term, unemployment will rise, business activity will falter and headlines will continue to be scary,” said Warren Buffett, according to CNBC a few months ago. “But fears regarding the long-term prosperity of the nation’s many sound companies make no sense,” he continued, “These businesses will indeed suffer earnings hiccups, as they always have. But most major companies will be setting new profit records 5, 10 and 20 years from now.”

Maybe these whirlwind movements in the U.S. economy are a matter of concern, yet we must remain attentive and not succumb to unnecessary fear or alarm.