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Cramer on trade: China could wait out Trump's presidency to make a deal, and that's bad for stocks

  • "Mad Money" host Jim Cramer reveals the market's new thesis on China and predicts what could happen if it comes true.

As markets swung lower, then higher on Thursday amid geopolitical worries, CNBC's Jim Cramer vetted a new thesis about what could be next in the U.S.-China trade clash.

"The new thesis I'm hearing is that the president's woes are making the Chinese more intransigent," the "Mad Money" host explained. "They're beginning to take a longer view that Trump's in real trouble and they can take more pain than we can and wait out the president."

"In other words, the Mueller investigation weakens the Trump hand, and it could actually hurt the global economy if it results in a prolonged trade war," he continued.

President Donald Trump, whose personal lawyer Michael Cohen is at the center of a scandal involving adult film actress Stormy Daniels, revealed on Monday that he knew of a $130,000 payment Cohen made to Daniels ahead of the 2016 election.

The president's comments came after Rudy Giuliani, the former mayor of New York and one of Trump's lawyers in special counsel Robert Mueller's Russia probe, told Fox News on Wednesday that then-candidate Trump repaid Cohen after Cohen paid Daniels.

Cramer argued that this nonstop, multifaceted newsflow could weaken Trump's position in dealing with China. China's lawmakers could simply choose to wait until the president's various issues are resolved — or until his four-year term is over.

"This narrative has become so ingrained that we have come to expect every stock to go down as it's repeated," Cramer said. "We'd like to think that the stocks of companies that have little to do with trade, or at least anything domestic, ... would somehow be immune, but if they're in the S&P 500, they go down."

Big hedge fund managers and individual investors alike have flocked to index funds like the S&P 500 in recent months, causing stocks to trade in tandem as the three Ts — Trump, tariffs and trade — fuel the market's concerns, Cramer explained.

But the broad-based declines have brought some courageous buyers out of the woodwork, too, the "Mad Money" host said.

"Periodically we get bargain-hunters [who come in] and basically say, 'Enough is already enough. It can't possibly be this bad,'" Cramer said. "Look, they might be right. Maybe there will be no negative headlines about Trump tomorrow — hey, crazier things have happened."

Better yet, if Trump's National Economic Advisor and former CNBC host Larry Kudlow is optimistic about his meetings in China this week, the bargain-hunters could really luck out, Cramer said.

"Or perhaps [tomorrow] will just be another lousy Friday like all the rest of them as people worry about what'll happen this weekend with China," he said. "If you have one takeaway from today, it should be that there comes a point where everyone is collectively too negative for that very moment, and that's when you have to take the other side of the trade."

WATCH: Cramer on 3 troubling Ts: Trump, tariffs and trade

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