Investment Guru Drops Protectionism Warnings at Berkshire Hathaway meeting
Trade sanctions imposed by the U.S. may potentially lead to a disastrous outcome for the economy, as per a cautionary statement by Warren Buffet.
Warren Buffett, the iconic Chairman of Berkshire Hathaway, spoke out at the company's shareholders' meeting on May 3rd, 2025, against the dangers of protectionist policies and their impact on the economy and stock market.
The Perils of Protectionism
Buffett warned that using trade as a political weapon, much like tariffs, can be detrimental to global prosperity. He referred to such measures as "acts of war" that could lead to unfavorable consequences. Stressing the importance of free trade, Buffett argued that using trade as a tool for geopolitical leverage can cause destabilization and strain relations with other nations [2][3].
Buffett's message emphasized that a more prosperous world benefits the U.S. He contended that the economic health of other countries enhances U.S. prosperity and security [2][3].
In the past, Buffett has frequently drawn attention to historical examples of the devastating economic consequences of protectionist policies, such as the Smoot-Hawley tariffs of 1930 that intensified the Great Depression [5]. He fears that modern protectionist measures like high tariffs on Chinese imports could wreak havoc on the U.S. economy. Evidence of this can be seen in the U.S. GDP contraction experienced in Q1 2025 due to supply chain disruptions and increased production costs [5].
Berkshire's Cash Cushion
Despite the challenges faced by the company, including a drop in operating earnings, Berkshire Hathaway has managed to maintain impressive cash reserves worth $347.7 billion. This substantial cash position underscores the company's cautious stance in the volatile market environment shaped by ongoing protectionist measures [5].
Berkshire's Shaky Quarter
The 1st quarter of 2025 saw a 14% decrease in operating profit for Berkshire Hathaway, dropping from $11.22 billion to $9.64 billion. A significant factor contributing to this decline was a 49% year-over-year drop in operating profit from insurance underwriting, which fell to $1.34 billion [4]. In contrast, investment income from insurance increased by 11%, reaching $2.89 billion [4].
The operational profit for BNSF grew by 6.2%, amounting to $1.21 billion, while Berkshire Hathaway Energy reported a 53% increase in operational profit, reaching $1.1 billion. Despite these gains, Berkshire's total net income dropped by 64%, settling at $4.6 billion [4]. The company's insurance float (a reserve for losses incurred) remained stable at $173 billion [4].
As for stock market transactions, Berkshire Hathaway was a net seller for the 10th consecutive quarter, buying stocks worth $3.18 billion and selling stocks worth $4.68 billion [4]. This shift resulted in a loss of $5.04 billion from stock market transactions, contrasting with a profit of $1.48 billion in the previous year. Berkshire Hathaway contends that this indicator might mislead investors unfamiliar with financial reporting rules [4].
Nonetheless, Buffett appears optimistic about future investment opportunities despite the market's volatility. His strategic approach aspires to capitalize on these future openings with the massive cash reserves Berkshire Hathaway holds [3][5].
In conclusion, Warren Buffett sends a clear message that protectionism poses challenges to global prosperity and market stability. He advocates for free trade and global cooperation to ensure stability and long-term economic success.
- Warren Buffett, the Chairman of Berkshire Hathaway, warns that protectionist policies, such as high tariffs, can have detrimental effects on global prosperity and the stock market during the company's shareholders' meeting in 2025.
- Buffett argues that while protectionism may seem beneficial for the US in the short term, it can lead to geopolitical instability and economic strain with other nations.
- Highlighting historical examples like the Smoot-Hawley tariffs of 1930, Buffett contends that recent protectionist measures could cause economic turmoil in the U.S, as evidenced by the contraction in U.S GDP in Q1 2025 due to supply chain disruptions and increased production costs.
- Despite a drop in operating earnings, Berkshire Hathaway maintains cash reserves worth $347.7 billion, reflecting the company's cautious stance in the volatile market environment shaped by ongoing protectionist measures.
- Buffett remains optimistic about future investment opportunities with Berkshire Hathaway's considerable cash reserves, despite the volatile market conditions resulting from protectionist policies and their potential impact on business, finance, politics, and general news.
