Warren Buffett appears to be sitting pretty amid the current stock market volatility. Berkshire Hathaway's shares are up around 15% year to date while the major market indexes are down significantly. Buffett has also built a massive cash stockpile of over $334 billion for the conglomerate to use if stock valuations become attractive enough for his liking.

However, Buffett isn't upbeat about the key underlying reason behind the latest stock market sell-off: worries about President Trump's tariffs. He recently posed a critical question about those tariffs -- and the stock market's fate hinges on the answer.

Image source: The Motley Fool.

Buffett on tariffs

CBS News' Norah O'Donnell recently interviewed Buffett. The legendary investor expressed reservations when asked about the U.S. economy, stating: "Well, I think that's the most interesting subject in the world, but I won't talk, I can't talk about it, though. I really can't."

However, Buffett couldn't resist taking the bait when O'Donnell asked him about the potential economic impact of tariffs. He replied that the U.S. has "had a lot of experience with them." Buffett added, "They're an act of war, to some degree."

Many economists believe that President Trump's proposed tariffs could lead to higher inflation. O'Donnell asked Buffett his opinion on the matter. The "Oracle of Omaha" responded: "Over time, they [tariffs] are a tax on goods. I mean, the Tooth Fairy doesn't pay 'em!"

But then Buffett put forth his own question about tariffs. He looked at O'Donnell and said:

And then what? You always have to ask that question in economics. You always say, "And then what?"

Two possible answers to Buffett's question

I'd argue that there's no more important question for investors right now concerning the Trump administration's tariffs than the one posed by Buffett. Granted, he didn't directly mention the president. However, he didn't have to; his question is clearly relevant to the current situation.

What will happen next if all of President Trump's tariffs are imposed? I think two possible answers reflect the best- and worst-case scenarios.

Let's start with the best-case answer. The Trump administration believes that tariffs will bring temporary and minor economic disruption and then lead to a stronger economy over the long run. In his recent address to Congress, President Trump predicted: "There'll be a little disturbance, but we're OK with that. It won't be much."

Trump believes tariffs will restore fairness to the country's trading with other nations. He argues that they will generate significant revenue for the U.S., telling Congress, "Tariffs are about making America rich again and making America great again." The president also thinks tariffs will bring jobs back to the United States. If he's right, the stock market could flail for a while but rebound strongly as the promised benefits of tariffs are realized.

So what's the worst-case answer? Larry Summers, who was the Treasury secretary in the Clinton administration and director of the National Economic Council during the Obama administration, recently provided his take in an interview with The Free Press. Summers said:

I think we are risking stagflation, increases in inflation to levels unambiguously above the 2% target, and growing concerns about an inflation spiral, simultaneous with withdrawals of confidence and purchasing power that could possibly tip the economy into recession. Given that we don't know how long these policies are going to last and what's going to follow, it would be premature to confidently conclude that grave economic damage is going to be done. But that is certainly the risk.

If Summers is right, the stock market would likely enter into another bear market. The last time the U.S. experienced stagflation, between 1973 and 1982, the S&P 500 floundered and the country had three recessions.

What others think

The Tax Foundation, a nonpartisan nonprofit organization that focuses on U.S. tax policies, analyzed President Trump's proposed tariffs. It concluded that tariffs would negatively affect U.S. GDP. The organization also predicted that, as a result of lower economic output, federal tax revenue would decline rather than increase -- especially if foreign countries imposed retaliatory tariffs, which is already happening.

Financial services company Morningstar agrees that the Trump administration's tariffs will hurt U.S. economic growth and increase inflation. So does the Organization for Economic Cooperation and Development, with the organization also mentioning the word "stagflation" in its forecast.

Over nine out of 10 corporate economists surveyed by Wolters Kluwer think the president's tariffs will cause inflation to be higher. Consumers appear to be worried as well, with consumer sentiment plummeting in March.

What should investors do?

What should investors do if the answer to Buffett's question about what happens next after tariffs are imposed isn't positive? I think following Buffett's lead makes sense.

As mentioned, the 94-year-old multibillionaire has built a large cash stockpile for Berkshire Hathaway. He has bought a few stocks, but only ones that meet his rigorous investment criteria. Most importantly, though, Buffett remains focused on the long term. He recently wrote to Berkshire shareholders that Berkshire's horizon when buying stocks "is almost always far longer than a single year" and with many "involves decades."

For Buffett, the "and then what" has always led to making money.