Jim Cramer explains how China’s manufacturing-based economy leaves it vulnerable to U. S. trade tariffs.
With investors seemingly undecided about how badly trade tensions with China will hit U. S. markets, CNBC’s Jim Cramer wanted to define the issue a bit more for Wall Street.
« ‘Who has more to lose?’ People keep asking this question about the trade war with China as though we don’t really already know the answer. But we do: the Chinese have more to lose, » the » Mad Money » host said Tuesday.
How did Cramer come to that conclusion? For him, the answer was simple: while the U. S. economy is mainly focused on consumer spending, the Chinese economy is centered around manufacturing.
« We buy lots of stuff from China, but with these new tariffs, it’s easy enough for our companies to start making the same merchandise in other countries, » he said. « Heck, Vietnam, Cambodia, Thailand, even Mexico are already less expensive places to do your manufacturing than China, even without the tariffs. »
Therefore, if U. S. companies stopped building factories in China, it could mean economic pain for the People’s Republic, he continued.
For more of CNBC’s coverage of the U. S.-China trade spat, click here .
As stocks shrugged off trade war fears on Tuesday, with the Dow Jones Industrial Average surging over 180 points, Cramer could imagine how some Wall Street hedge fund managers were feeling.
« Many of these fund managers are kind of paranoid. They see systemic risk all over the place where it doesn’t exist, » he said.
« Every time a country in Europe or Asia struggles with its currency or its banking system or its finances — we’re talking Turkey, Greece, Cyprus — these guys decide it’s an opportunity to short stocks, » he continued. « Every new tariff begets another reason to bet against the market. »
But the shorts don’t seem to be working. Hedge fund managers that have bet on stocks like Boeing, which sells one in four of its airplanes into China, going lower because of the U. S.-China trade spat haven’t exactly won out, Cramer said.
Instead, short-sellers have watched their strategies unwind because investors just don’t seem eager to sell their holdings, a crucial piece of short-selling strategy, the « Mad Money » host said.
