"It says to China you are our enemy," Cramer said on "Squawk on the Street." "This is about China being our intellectual and economic enemy," he added. "I think [saying] anything short of that is just a mistake."
On Tuesday morning, Trump announced he plans to appoint Pompeo to succeed Rex Tillerson as secretary of State, the latest news in a string of personnel changes at the White House. Tillerson's departure followed a series of public disagreements with Trump.
The president also said he is looking at CNBC senior contributor Larry Kudlow "very strongly" for the role of top economic advisor.
Cramer said having both Pompeo and Kudlow, a confidant of Trump and longtime economist, in the White House would be an interesting dynamic.
Tillerson stood for free trade and commerce, while Pompeo has equated China with Russia, Cramer added. Kudlow previously said Trump's tariffs on steel and aluminum are a "bad omen" and could cause a "major calamity."
"If you're China, you're probably sitting there thinking, 'What is [Trump] doing?" said Cramer, the host of CNBC's "Mad Money."
Pompeo also has likened Iran to the Islamic State militant group, calling the country a "thuggish police state" in a speech in October.
Cramer added having Tillerson in the role as secretary of State "stood for a bizarre form of business globalism that is obviously not in sync anymore with where the president is going."