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CNBC's Jim Cramer said Tuesday that investors should be prepared for the United States to slap another round of tariffs on Chinese imports.
A tweet from President Donald Trump bashing the country earlier that day confused Wall Street, the "Mad Money" host said, causing the Dow Jones Industrial Average to fall more than 23 points and both the S&P 500 and Nasdaq Composite to tumble about 0.25%.
The market would have finished much lower during the session if it weren't for optimism that the Federal Reserve will cut interest rates on Wednesday, he said.
"If the trade war with China escalates again, we're going to need these rate cuts," Cramer said. "Taunting does not a trade policy make. But it sure does sound like we're about to get another round of tariffs."
The U.S. has been engaged in a trade war with China since last year and both countries have imposed duties on billions of dollars worth of goods. Trade officials are in China this week to attempt to make progress on a trade deal, but Cramer worries that a series of Trump tweets — which included messages like "[the Chinese] always change the deal in the end to their benefit" and "we have all the cards" — could derail those efforts and lead to new tariffs on the remaining $320 billion worth of Chinese exports.
"Believe me ... I am very sympathetic to the president's arguments on China: I'm in favor. He's not wrong," Cramer said. "But just because something is true, that doesn't mean you should tweet it to the entire world. I found the timing terrible."
Apple would not be able to replicate the strong quarter it reported after Tuesday's market close if more taxes go into effect, Cramer said. While iPhone sales slumped 12% compared to the year prior, services revenue accelerated 13% during the period. The stock is climbed 4% in after-hours trading.
Industrial companies such as engine-maker Cummins, who dealt with low demand in China in its recent quarter, would also face more pressure, the host added.
Wall Street will be watching to hear what the Fed has to say about monetary policy on Wednesday. Cramer, along with many other analysts, is expecting a quarter-point rate cut to sustain economic expansion.
"Thank heavens [Fed Chair] Jay Powell's got our back, because the president's too busy stabbing his own Treasury Secretary in the back to accomplish anything positive," Cramer said.