Cramer Remix: Why China has much more to lose in a trade war

  • CNBC's Jim Cramer explains how China’s manufacturing-based economy leaves it vulnerable to U.S. trade tariffs.
  • The "Mad Money" host also sits down with the CEO of Tilray and the CFO of Square.
  • In the lightning round, Cramer points to a "winner" in the biotechnology space.

With investors seemingly undecided about how badly trade tensions with China will hit U.S. markets, CNBC's Jim Cramer wanted to define the issue a bit more for Wall Street.

"'Who has more to lose?' People keep asking this question about the trade war with China as though we don't really already know the answer. But we do: the Chinese have more to lose," the "Mad Money" host said Tuesday.

How did Cramer come to that conclusion? For him, the answer was simple: while the U.S. economy is mainly focused on consumer spending, the Chinese economy is centered around manufacturing.

"We buy lots of stuff from China, but with these new tariffs, it's easy enough for our companies to start making the same merchandise in other countries," he said. "Heck, Vietnam, Cambodia, Thailand, even Mexico are already less expensive places to do your manufacturing than China, even without the tariffs."

Therefore, if U.S. companies stopped building factories in China, it could mean economic pain for the People's Republic, he continued.

For more of CNBC's coverage of the U.S.-China trade spat, click here.

How short-sellers are coming up short

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STR | AFP | Getty Images

As stocks shrugged off trade war fears on Tuesday, with the Dow Jones Industrial Average surging over 180 points, Cramer could imagine how some Wall Street hedge fund managers were feeling.

"Many of these fund managers are kind of paranoid. They see systemic risk all over the place where it doesn't exist," he said.

"Every time a country in Europe or Asia struggles with its currency or its banking system or its finances — we're talking Turkey, Greece, Cyprus — these guys decide it's an opportunity to short stocks," he continued. "Every new tariff begets another reason to bet against the market."

But the shorts don't seem to be working. Hedge fund managers that have bet on stocks like Boeing, which sells one in four of its airplanes into China, going lower because of the U.S.-China trade spat haven't exactly won out, Cramer said.

Instead, short-sellers have watched their strategies unwind because investors just don't seem eager to sell their holdings, a crucial piece of short-selling strategy, the "Mad Money" host said.

Click here for more of Cramer's analysis and his take on how the shorts contributed to Tuesday's rally.

Tilray CEO: Pot is 'a great hedge' for drug, alcohol companies

Brendan Kennedy, CEO, Tilray 
Scott Mlyn | CNBC
Brendan Kennedy, CEO, Tilray 

Pharmaceutical companies have to start thinking about partnering with cannabis companies as a "hedge" against the burgeoning marijuana industry, Tilray CEO Brendan Kennedy told CNBC on Tuesday.

"They have to hedge this," Kennedy told Cramer in an exclusive interview. "Cannabis is a substitute for prescription painkillers, prescription opioids, and so if you're an investor in a pharmaceutical company or you're a pharmaceutical company, you have to hedge the offset from cannabis substitution."

The CEO said the same goes for alcohol manufacturers, some of which, namely Constellation Brands, have already begun to invest heavily in marijuana plays.

"I think all the alcohol companies need to enter this industry. It's a great hedge for them," Kennedy told Cramer. "Whether you're an alcohol or an investor in an alcohol company, this is a global opportunity."

Watch and read more about Kennedy's interview here.

Square CFO: How Caviar could change the restaurant space

Sarah Friar, CFO, Square
Scott Mlyn | CNBC
Sarah Friar, CFO, Square

Enough about retail. Now, fintech giant Square is trying to cultivate an "omnichannel" approach in the restaurant industry, the company's CFO, Sarah Friar, told CNBC on Tuesday.

To push this strategy, which could involve sweeping changes at some smaller and more high-end restaurants, Square will leverage its fast-growing food-ordering subsidiary, Caviar, Friar said.

"What we want to make sure [of] with Caviar and with the broader Square platform ... as we integrate it into things like Square for Restaurants, [is] that a restaurant can now fully serve their customer regardless of where the customer shows up," the CFO told Cramer in an interview.

Maintaining that Caviar, which is showing 100 percent year-over-year growth, was only "one piece of the portfolio," Friar said that Square would use its connection to the client to build omnichannel capabilities.

To watch and read more about her interview, click here.

A slam dunk for Splunk?

Doug Merritt, CEO, Splunk
Scott Mlyn | CNBC
Doug Merritt, CEO, Splunk

With shares of cloud king Splunk off their highs since the company's strong quarterly report last month, Cramer said the dip presented an attractive buying opportunity.

A company that helps make sense of huge swaths of unstructured, disorganized data, Splunk recently decided to transition to a subscription-based business model, offering its software to clients on a perpetual basis.

"When software companies like Splunk embrace a software-as-a-service business model, Wall Street tends to underestimate them because people look at the wrong metrics," Cramer said. "Remember that piece I did about how I wasn't looking right [at] Autodesk?"

While Wall Street was suspicious of Splunk's shift at first, it has really started paying off, with billings rising by double-digits just in the last quarter.

"The recent pullback is giving you a terrific buying opportunity, because I bet Splunk has more room to run after a quarter that both explains and cries out for a higher valuation," the "Mad Money" host said.

Lightning round: All in for AMGN

Biogen: "I think there are a lot of ways to win. I mean, look, I didn't like the hype involving their Alzheimer drug. I do prefer Regeneron and then I think that Amgen is better. It's been a winner."

Under Armour: "I know it broke down last week. I made as many calls as I could. I could not find the reason why it broke down. I do prefer Nike here. I think Nike's going to have a good quarter. Remember that we did the big piece yesterday on Vans, which is owned by VF. VF may be the best shoe company people aren't thinking about."

Disclosure: Cramer's charitable trust owns shares of Amgen.

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