Jim Cramer sees six signs that President Donald Trump won't back down on the U.S.-Chinese trade dispute, which could spark huge new tariffs on Chinese exports to America as early as Friday.
"You can see how the president is framing things: 'It's a broken deal -- broken by the Chinese,'" Cramer said Thursday during an exclusive video-conference call for members of his Action Alerts PLUS club for investors. "I know that sometimes the president can seem to be flamboyant in his attacks, [but] it sure seems like the last-minute actions by the Chinese totally backfired and sent negotiations back to the hardliners."
Cramer said he sees six reasons why Trump won't back down against the Chinese:
- U.S. Companies Already Got Big Tax Breaks. The president gave all U.S. businesses huge tax breaks as part of his 2017 tax law, so Trump believes they shouldn't suffer all that much if they have to pull out of China altogether.
- Trump Wants to Keep U.S. Dollars From China. Trump really does want American companies to do less business in China so that the Chinese won't have enough money to advance their "belt-and-road" initiatives and geopolitical aims.
- Other Countries Offer Low-Cost Manufacturing, Too. U.S. companies that insist on using Chinese labor and manufacturing will have lower profit margins than if they move operations to other developing countries. Cramer cited Funko as one company that understands this well.
- Trump's Base Is Still With Him. You'd think that Trump supporters would be upset about the higher consumer costs that U.S. tariffs can bring, but they aren't complaining. "They believe this is a patriotic war [and they're] happy to fight it," Cramer said. "They'd boycott products made in China if the president asked them to."
- America Doesn't Export That Much to China Anyway. Trump knows the U.S. economy is huge and service-oriented and won't export that much to China in any case. "So, he's ready for retaliation that he'll just make fun of anyway," Cramer said.
- The President Doesn't Care if China Loses Face. Unlike previous presidents, Trump isn't worried about giving the Chinese a way to save face. Instead, "he wants to rip their faces off to the delight of his base," Cramer said. "Those who are really hurt like the farmers will get [U.S. government compensation], perhaps from the money taken in from tariffs."
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This article was written by a staff member of TheStreet.