"We need to approach these trade sanctions, ones that will impact multiple so-called trading partners, in two ways. First, I'll put on my Cassandra hat to ... spell out the worst-case scenario," the "Mad Money" host said. "Then I'll tell you my feelings, my thoughts, on why these tariffs may not be the end of the world as we know it."
Scores of Wall Street investors bought into the worst-case scenario on Thursday, sending the Dow Jones industrial average down more than 550 points intraday after Trump's announcement.
Their main reasons for panic were that the Chinese government could retaliate with its own tariffs on U.S. goods; that steel and aluminum prices would rise, causing a ripple of inflation; and that Trump's move would spur a full-blown trade war, slowing the economy and potentially even sparking a recession or depression.
But Cramer argued that the best-case scenario was far more likely.
For starters, he argued, the Chinese know that they have been "dumping" steel, or keeping prices artificially low to stave off competition and force U.S. companies to buy their cheap product.
Cramer pointed out that President Obama took steps to prevent dumping without causing raging inflation or drastic Chinese retaliation.
"The Communist Party [in China] wants to cutback on pollution anyway. They may decide to shut down some steel and aluminum plants purely as a goodwill gesture," Cramer said. "Sound crazy? I think it's actually a lot more likely than China initiating a full-scale retaliation to our moves."
The "Mad Money" host also reminded investors that the "mercurial" Trump sees the stock market as his effective rating system, so if his protectionist moves cause more pain than gain for stocks, he could still change his mind.
Lastly, Cramer maintained that the market needed a reset to shake out the weak hands after its massive rally.
"If you can't take the pain, by all means feel free to lock in some profits. No one ever got hurt taking a profit. I'm sure you've got plenty of big gains," he said. "However, I don't think these tariffs will be a front-and-center story a week from now. If you're nimble enough to get out and get back in, ... be my guest. But most people aren't that nimble."
"Here's the bottom line: I have not been worried about a potential trade war. No. We've been losing them for years. My fear was always that an anti-protectionist panic would cause us to get slammed, just like we were today," the "Mad Money" host said. "In the end, I believe this market will settle down and the bear case is simply way too extreme, verging on hysterical, while the not-so-hot case that produces a garden-variety sell-off, well, let's just say that's the far more likely scenario."