Billionaire investor Warren Buffett told CNBC on Monday that an escalation of the U.S.-China trade fight would be "very bad" for the whole world.

The stock nosedive in premarket trading on President Donald Trump's weekend threat to increase tariffs on China is "rational," Buffett said, acknowledging the high stakes of the "dangerous game" being played by the world's two biggest economic superpowers. "It doesn't mean it's a game that shouldn't be engaged in."

"If we actually have a trade war, it would be bad for the whole world, and could be very bad, depending on the extent of the war," Buffett said, but added: "There are times in negotiations when you talk tough."

Buffett refused to put odds on how the trade talks would turn out or whether Trump would follow through on his tariff threat: "With some people in negotiations, the best technique is to act half crazy."

Different people negotiate deals in different ways, Buffett noted. He added that the way Trump is negotiating with China is not how he would handle it "at all," suggesting a more take-or-leave it approach.

"I've had a consistent way of negotiating," Buffett said. "I just say what I'll do, and I don't do anything else. People really know that's what I mean."

Without mentioning the former real estate dealmaker Trump by name, Buffett said "lots of people in acquisitions ... really like to play games" but it takes too long to figure out if a deal is ever achievable. "It would be a huge time waster if we did it" in our business.

The Oracle of Omaha appeared on "Squawk Box" for a wide-ranging interview on Monday, following the weekend festivities at Berkshire Hathaway's annual shareholder meeting.

The Berkshire chairman and CEO held court on Saturday before a crowd at CHI Health Center in Omaha, Nebraska, talking about the company's purchase of Amazon shares, and why he stepped in to help finance a potential mega energy deal. He also bashed bitcoin again, calling it a "gambling device." Buffett also said any CEO of a bank that needs a government bailout should lose his or her net worth.