Skip to main content

Cramer Says China Is Playing With Fire in Trade War, Not the U.S.

The U.S. just announced a new set of $200 billion in tariffs on Chinese imports Tuesday night.
  • Author:
  • Publish date:

In spite of the market's reaction, a new round of tariffs is not the end of the world, according to Action Alerts PLUS chairman Jim Cramer.

The Dow Jones Industrial Average was down triple digits Wednesday, July 11, breaking a week's worth of momentum, following the White House's announcement of $200 billion in duties on Chinese imports.

While a trade war isn't good for either party, the market is overreacting to the news, according to Cramer.

"It is the Chinese who are playing with fire, not us. Even if you think the president is wrong to ratchet things up further," Cramer told the audience during his monthly Action Alerts PLUS members call.

Scroll to Continue

TheStreet Recommends

One of the reasons for Cramer's optimism is the fact that the U.S. is actually not an exporting powerhouse. He pointed out that the U.S. is the 155th largest exporter as a percentage of gross domestic product.

Meanwhile, exports accounted for about 18.54% of GDP in 2017, according to Statista. While this is nearly half the 35% level it had in 2007, it is still well ahead of the U.S. reliance on exporting products.

"This won't last forever and the U.S. has the upper hand. So I am willing to take the risk that earnings are not going to be hurt," Cramer said. "Those stats and not whether I want to make America Great again -- and by the way, we have always been great -- are what is at stake here."

For critics of the tariffs, the stats that are really at stake are American jobs. But Cramer looks to history for guidance on the pain that employees may see stateside as a result of these tariffs.

"When the U.S. slapped that 30% tariff on steel -- 5% higher than the current one -- back in 2001, the International Trade Commission said that it only cost our country about 13,000 jobs," Cramer said. Yep, a 30% tariff didn't hurt a much weaker economy than we have now where more than 500,000 jobs were created in the last year in manufacturing and construction."

Do you want more exclusive investing insight from Jim Cramer? Get 24/7 access to Jim's charitable-trust portfolio with a free trial to Action Alerts PLUS! You can also watch all of Jim Cramer's New York Stock Exchange live shows on YouTube.