Investors can afford to sell a few stocks and protect some of the gains they made on the market here, but they shouldn't quit just yet, CNBC's Jim Cramer said Thursday.
The major U.S. averages all tanked about 1% in the session as Wall Street reacted to a fresh new round of tariffs that will be imposed on Chinese imports next month.
Still, the market has to take into account how the People's Republic of China may respond to President Donald Trump's decision to tack 10% duties onto another batch of $300 billion in goods, the "Mad Money" host said. It's worth waiting until the smoke is clear to start buying high-quality names at a discount, he added.
"Once you take profits, there's no reason to start buying immediately," Cramer said.
"We are barely down, though. We haven't even seen the Chinese response yet, and I have to believe it will be swift and when they do the stocks are going to go lower and you'll be glad you sold a little," he continued. "There's no reason to be a hero here — you've got to wait and see what happens."
The latest round of tariffs is "game changing" for the ongoing trade war between the world's largest economies and prove that there is no breaking point for Trump, Cramer said. In a tweet announcing the move, the president vented his frustration, among other sticking points, that China failed to follow through on a promise to buy a large amount of crops from American farmers.
It is unclear how soon a trade deal could as talks between the two nations this week did not yield a conclusion to the trade dispute.
Cramer suggested that investors search for stocks of dividend paying or growing companies that will feel little to no impact from the tariffs. Those are the equities that money managers will pour money into, as they did in reaction to the first two rounds of tariffs, he said.
"I think it's too soon to buy anything but the domestic stocks that have zero exposure to China, either as a supplier or as an end market," Cramer said. "After the smoke clears, companies that cater to small- and medium-sized businesses could be worth buying, too."
Utility stocks are safe to buy with the 10-year treasury yield falling below 2%, he added. Consolidated Edison, American Electric Power, Dominion Energy are worth a play. The former two stocks increased 1.1% and the latter gained 2.2% during the trading day.
A company like Procter & Gamble, whose stock dipped 1.11%, that has a lot of business in China is too hot to touch here, even after its positive quarter report, he said.
"We're now back in a world where international companies will be forced to cut their forecasts," Cramer said.
Apple, whose shares climbed above $218 earlier in the day before losing those gains closing down more than 2%, was punished because its iPhones and computers are assembled in China. The new taxes are expected to raise their prices, and Cramer says that will benefit Samsung phones.
Trump, Cramer said, still has more ammo in the chamber as he has room to later increase the looming tariffs to 25%.
"One thing's certainly clear: Jay Powell, our clever Fed Chief, had great intuition about these tariffs," the host said. "Can you imagine how bad today would've been if Powell hadn't cut us that quarter point break? Plus, he's now got a lot more ammo" to keep easing.
Disclosure: Cramer's charitable trust owns shares of Apple.