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2018: How will tariffs affect Berkshire's manufacturing businesses?
AUDIENCE MEMBER: Good morning, Warren Buffett and Charlie Munger. My name is Ethan Mupposa (PH), and I am from Omaha, Nebraska.
My question is, how will Donald Trump’s tariffs affect the manufacturing business of Berkshire Hathaway?
WARREN BUFFETT: Well, to date — (applause) — steel costs — we’ve seen steel costs increase somewhat. But as I said earlier, I don’t think the United States or China — there’ll be some jockeying back and forth, and there will be something that leaves some people unhappy and — but I don’t think — I don’t think either country will dig themselves into something that precipitates and continues any kind of real trade war in this country.
We — we’ve had that in the past a few times. And I think we’ve learned a general lesson on it.
But there will — there will be some things about our trade policies that irritate others. And there will be some from others that irritate us. And there will be some back and forth. But in the end, I don’t think we’ll come out with a terrible answer on it.
Charlie, I’ll let you —
CHARLIE MUNGER: Well, steel has — it reached — the conditions in steel were almost unbelievably adverse to the American steel industry.
You know, even Donald Trump can be right on some of this stuff. (Laughter and applause)
WARREN BUFFETT: The — the thing about trade — you know, I’ve always said that the president, whether it’s president — any president — needs to be an educator-in-chief, which [Franklin] Roosevelt was in the Depression. That’s why he had those Fireside Chats, and it was very important that he communicated to the people what needed to be done and what was happening around them, and —
Trade is particularly difficult, because the benefits of trade are basically not visible, you know. You don’t know what you would be paying for the clothes you’re wearing today if we’d had a rule they all had to be manufactured in the United States, or what you’d be paying for your television set, or whatever it may be.
No one thinks about the benefits day-by-day as they walk around buying things and carrying on their own business.
The negatives, and there are negatives, are very apparent and very painful. And if you’re laid off — like happened in our shoe business [Dexter Shoes] in Maine — and you know you are — been a very, very, very good worker, and you were proud of what you did, and maybe your parents did it before you, and all of a sudden you find out that American shoes — shoes manufactured in America — are not competitive with shoes made outside the United States.
You know, you can talk all you want about Adam Smith or David Ricardo or something and explain the benefits of free trade and comparative advantage and all that sort of thing, and that doesn’t make any difference.
And if you’re 55 or 60 years old, to talk about retraining or something like that, you know, so what?
So, I — it is tough in politics where you have a hidden benefit and a very visible cost to a certain percentage of a — of your constituency.
And you need to do two things under those circumstances, if you have that situation. You know what’s good for the country. So, you have to be very good at explaining how it does really hurt, in a real way, somebody that works in a textile mill, like we had in New Bedford, where you only spoke Portuguese — half our workers only spoke Portuguese. And suddenly, they have no job. And they’ve been doing their job well for years.
You’ve got to do two things. You can — you’ll have to — you have to understand that that’s the price individuals pay for what’s good for the collective good.
And secondly, you’ve got to take care of the people that are — that — where retraining is a joke because of their age, or whatever it may be. And you’ve got to take care of the people that become the roadkill in something that is collectively good for us as a country. And —
That takes society acting through its representatives to develop the policies that will get us the right collective result, and not kill too many people economically in the process. And you know, we’ve done that in various arenas over the years.
The people in their productive years do help take care of the people that are too old, and too young. I mean, every time a baby is born in the United States, you know, we take on an obligation of educating them for 12 years. It’ll cost $150,000 now, you know? It —
We have a system that has a bond between the people in their productive years and the ones in the young and old. And it gets better over time. It’s far from perfect now. But it has gotten better over time.
And I believe that trade, properly explained, and with policies that take care of the people that are roadkill, is good for our country and can be explained.
But I think it’s a tough — it’s been a tough, tough sell to a guy that made shoes in Dexter, Maine or worked on a loom in New Bedford, Mass, or works in the steel mill in Youngstown, Ohio. (Applause)