"If we do the tariffs on China that's going to make it a little bit tough on the market," the co-founder of Appaloosa Management said Thursday on CNBC's "Halftime Report."
"It is a little tricky at this point of time. ... It's a late inning game."
He said stocks could drop 5 percent to 20 percent if trade tensions between the world's two largest economies increase
The investor said he is now about 25 percent exposed to the stock market. Tepper called the market "fairly valued" if the U.S. doesn't impose more tariffs on Chinese goods.
"I've taken down my exposure [to equities]," he said. "I'm just not sure what's going to happen with these tariffs. ... Our whole book we probably took down 30 percent at some point, the equity part."
Last Friday, Trump said he was "ready to go" on tariffs for another $267 billion in Chinese goods, which would be on top of the proposed tariffs on $200 billion in goods already being considered.
The public comment period on the $200 billion tariff plan expired Thursday. The world's two largest economies have already applied tariffs to $50 billion of each other's goods.
In January, Tepper was more optimistic about stocks. He told CNBC that month the bull market still had room to grow, citing Trump's tax cuts and equity valuations.
From inception in 1993, Tepper's hedge fund generated gross annual returns of more than 30 percent, according to a source familiar with the firm's returns.
The billionaire investor is also the owner of the National Football League's Carolina Panthers.