Jim Cramer warns renewed U.S.-China trade tensions worry investors

CNBC’s Jim Cramer on Thursday said the stocks of companies with ties to the Chinese economy brought the market down as Wall Street cools off from recent gains.

Global technology plays — the ones doing business in China — were among the biggest losers on a day where the major averages took a break from their rally. The Dow Jones Industrial Average closed down about 102 points, or 0.4{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}, to 24,474.12. The S&P 500 and Nasdaq Composite both pulled back just shy of 1{3c4481f38fc19dde56b7b1f4329b509c88239ba5565146922180ec5012de023f}.

“The market may have been hit, but today’s action was still pretty upbeat about the U.S. economy,” Cramer said on “Mad Money.” “The decline in the averages came from the White House once again getting tough on China, which is why I think we should hold off on another trade war until the economy’s in better shape.”

Investors are trying to gauge the potential of another trade spat between the United States and China, the two world’s largest economies, he said, calling into question a tweet from President Donald Trump. Trump, frustrated with China’s handling of the coronavirus outbreak that was first discovered in the Chinese city of Wuhan, said Beijing’s spokesman “speaks stupidly” on the country’s behalf.

Experts have warned that tensions between the two nations could escalate again, leading into the November election.

“The personal nature of his tweet attacks feels like an escalation,” Cramer said. “When the White House gets ad hominem, that means companies that do lots of business with China need to get ready for a world of hurt. Wall Street doesn’t like ad hominem.”

Investors have turned more bullish on what Cramer called “recovery plays,” stocks in the retail, housing, travel and industrial sectors, as the American economy slowly reopens for business. These sectors were devastated by stay-at-home orders intended to fight the coronavirus. Those plays continued to move higher during the trading day, Cramer noted.

On Thursday, the U.S. reported more than 2.4 million new weekly jobless claims, which have been on a decline the past seven weeks. Coronavirus shutdowns across the country have led to at least 38.6 million job losses in the U.S. economy.

U.S.-China relations are “why the big international tech stocks led us lower today,” Cramer said. “[It] had nothing to do with the horrific labor market here in the United States, Wall Street is still very much divorced from Main Street.”