Investors buying up stocks that tend to benefit from good U.S. relations with China will be left disappointed, according to CNBC’s Jim Cramer.
That’s because those investors are under a false impression that “we may be having a thaw in our trade war with China,” the “Mad Money” host said Thursday. “Just one problem: it’s a total misread of the situation.”
Cramer spoke shortly after U.S. stocks closed higher Thursday, approaching record levels, as Wall Street digested news on the U.S.-China trade war, a dispute which has lasted for more than a year and sparked stock market turmoil.
President Donald Trump on Wednesday agreed to delay the tariffs on $250 billion worth of Chinese goods by two weeks as a “gesture of good will” to China. The president’s gesture followed an earlier move by Beijing to exempt 16 types of American products from additional tariffs, including food for livestock, cancer drugs and lubricants.
On Thursday, the Dow Jones Industrial Average saw its seventh positive session in a row for the first time since May 2018. It is now on pace for its third positive week in a row along with the S&P 500 and Nasdaq.
While the postponement is a positive development, Cramer said investors have to remember why Trump began the trade war in the first place.
“He was focused on the trade deficit,” Cramer said. “If the Chinese Communist Party had simply stepped up and bought a lot more goods from the United States, they probably could’ve nipped this whole thing in the bud.”
“But they didn’t,” he continued. “And now the president’s digging in his heels, insisting that China address all sorts of inequities — the stuff that really matters, as far as I’m concerned. That’s why the Chinese response to the president’s two-week reprieve is so tone deaf. We’re way too late in the game for him to be appeased by a soybean buy.”
Trade officials from both sides are expected to hold talks in Washington in early October.