Jim Cramer Slides To Dark Side On China Tariffs

Jim Cramer, a staunch free trader, has abruptly gone over to the dark side on the issue of China tariffs. Originally, he posted the argument that China tariffs were bad, and that Apple would suffer. Originally, I spoke about Cramer's early position:

Even Jim Cramer has finally spoken of the the companies and deals that could be sacrificed as he finally acknowledges that Trump wants a cold war and Wall Street does not. Cramer listed Micron Technology and Rockwell Collins as being particularly vulnerable. Apple and others may have enough pull with the Chinese government to avoid being sacrificed, but it certainly is a dicey situation for retail investors. 
Unfortunately, Wall Street has not enamored itself to the public or it would and could make a stronger argument for free trade. 

But now, the CNBC stock analyst has come out of the tariff closet to support as yet unknown tech companies in California who want the trade war to continue. From CNBC we see the following:

 

Technology executives are telling CNBC’s Jim Cramer that they’re willing to endure short-term pain from the U.S.-China trade war in favor of the long-term payoff.
“When I went out to San Francisco last week, I heard the same thing from a surprising number of people in the tech industry who do not like President [Donald] Trump one bit, ” the “Mad Money” host said Monday.
“What they said was ‘If we’re going to take on China, now’s the time to do it,’” he said. “They may not be fans of the president, but they’re on board with the trade war.”

Cramer goes on to say that they see China's weakness, economically, as a time to go try the tariff war on China, as its imports and exports are taking large declines. Cramer goes on to say this is the time to stop the joint ventures and give US tech complete access to Chinese markets without sharing technology. And astonishingly, Jim concludes with support for this position:

See, it’s when, not if, because China’s economy is actually far weaker than people seem to realize. That’s why these execs want to press the bet, and you know what? I agree with them.

In my view, this crossover to the dark side is pure insanity. First of all, we are hearing that the US wants to monitor China continually, and the threat to slap tariffs would be ever present going forward. That cannot work with regard to deployment of capital in supply chains. This is like actually applying tariffs when it comes to investment.

Michael Ashton, Talkmarkets contributor, recently attempted to address the ramifications of this sort of squeeze on China. He said:

If China buys an extra trillion dollars’ worth of US product, where do they get the dollars to do so? There are only a few options:

1. They can sell us a lot more stuff, for which they take in dollars. But that doesn’t solve the trade deficit.

1. They can buy dollars from other dollar-holders who want yuan, weakening the yuan and strengthening the dollar, making US product less competitive and Chinese product more competitive globally. This means our trade deficit with China would be replaced by trade deficits with other countries, again not really solving the problem.

1. They can use the dollars that they are otherwise using to buy financial securities denominated in dollars, such as our stocks and bonds.

Michael goes on to say that the Chinese have a trillion dollars of US treasuries and much real estate and other US assets. They could be sold, to buy more US product, until the assets are gone. Then what? This does not even take into account the intellectual property issue. 

And what we are getting from Cramer is that the intellectual property issue is all that really matters. 

So, if the real issue that bonds liberal techies and cultist Donald Trump is intellectual property, China will have to get the intellectual property, specifically advanced chip design and production, elsewhere. That means Taiwan, Israel and Japan. 

As for Taiwan, Micron is there, and appears to be as advanced as any chip company. China has said that peaceful unification is the preferred way, but force is a last result. Are the American chip companies and Donald Trump signing away Taiwan's freedom? Are we looking at World War III?

As for Israel, the US recently warned it to quit using Chinese technology and quit cooperating in joint ventures. Israel brushed aside the warning, saying that security warnings from the USA are a joke:

The security warnings about the Chinese are a joke, completely mad,” said one senior government source. “If they want to gather intelligence, they can simply rent an apartment in Haifa instead of investing in ownership of a port.

This has been the Israeli position as I pointed out recently:

While Donald Trump is busy trying to hide US technology to China, one wonders if that is a losing proposition. China simply increases its cooperation with Israel and with Japan, both highly advanced nations in the tech sector. 
While it is too early to view Japan and Israel as refugees from Trump policies, it is clearly true that it makes no economic sense for those two nations to tie their economic futures solely to a nation in the process of turning inward. Any nation threatening worldwide trade wars is seen as being unstable relative to what it once was. 

The principle of turning inward versus free global trade is still in force, Mr. Cramer. Others are close to jumping ship. Even the Japanese can see the handwriting of isolationism  written on the wall:

Even though Abe spent just three days in China, observers said the trip was an important step in the two countries’ rapprochement, and was partly triggered by the uncertainty that has grown up around the United States’ policies in Asia since Donald Trump took over as US president.

The world appears to be gravitating toward cooperation, while Trump is pushing everyone away. He is,to put it bluntly, a person not to take seriously in the face of long term goals of cooperation among the nations. And the cooperation the rest of the world is attempting is putting their nations first, and free trade first. 

The attempt to monitor China will turn out to be very damaging. If Trump is serious about this hard line, America will be the loser, as China is already losing and is making adjustments. We are in the first half, and a good coach makes adjustments. Xi will tweak world cooperation in the face of US arrogance and dark side thinking, and that is a guarantee.