Billionaire hedge fund manager Stanley Druckenmiller told CNBC on Friday that while the Trump administration's tariffs may not appear that damaging on paper, their chilling effect on business sentiment could have an even greater impact on the economy and financial markets.

"Animal spirits is something you can't measure, but confidence matters," he said on "Squawk Box." "And you do wonder whether this is enough to kill animal spirits."

"If you're a company and you're thinking about building a plant or doing capital spending — I mean really? Aren't you going to wait now? See how this thing is resolved, what's going on?" he added.

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Equities slid in the month after Trump's May 5 tweet sparked renewed angst surrounding U.S. trade with China. The Dow Jones Industrial Average fell more than 1,700 points in May following the president's tweet and threats of retaliation from Beijing. The S&P 500 fell 6.5% during the month.

Druckenmiller says he's unsure about the direction of markets right now. He's not overly bearish or bullish on stocks.

"If you calculate the tariffs, at least the one we've had just in and of themselves, it doesn't look like it's that damaging. But at the same time, Ben Bernanke — who's a great, great mind, got a lot of IQ points on me — he thought subprime was contained," Druckenmiller said.