CNBC's Jim Cramer said Tuesday that the U.S.-China trade war will not lead the American economy into a significant decline.
The "Mad Money" host, who has generally been in favor of a tough trade policy with the economic powerhouse, says he is "more sanguine" that the ongoing tensions may force the Chinese government to make concessions on the trade front.
However, he has not been a fan of President Donald Trump's method of diplomacy by tweet.
"We are not going into recession, people. We're not because the tariffs are not going to do that," Cramer said. "We have too much steam to fold."
Private industry in China has found itself in rough waters, due in part to the number of American businesses that have relocated operations out of the country in the wake of the trade war. Many of those U.S. companies are trying to avoid the existing tariffs on imports from China. Trump is threatening to tack on another round of tariffs starting Sept. 1 that would in effect place duties on all goods sent to the U.S from China.
The Chinese economy slowed to 6.2% in the second quarter this year — its weakest posting since 1992. The Chinese government has retaliated with its own tariffs and by reducing the amount of crops it purchases from the U.S. Tariff costs are often passed on to consumers via higher sticker prices on products.
Goods and services trade between the two countries totaled about $737 billion in 2018 — with Chinese imports to the U.S. reaching $558 billion, according to the Office of the U.S. Trade Representative.
"We've got a strong job market, incredibly low inflation, plentiful natural resources. China's facing a mass exodus of jobs, thanks to the tariffs and their economy was already fragile," Cramer said. "At the end of the day, we don't need to make a deal. However, I think that's actually a bad and unnecessary outcome … [but] it's still not going to wreck our whole economy."
Three issues triggered Wall Street's deep decline on Monday and things won't get better until they are addressed, Cramer said.
The major averages managed to recover more than 1% of its losses from the worst trading day of the year, but the host says there's more work to be done before the coast is clear. The Dow Jones Industrial Average bounced back by more than 311 points on Tuesday, after plunging almost 770 points at one point during the session.
"Those three prongs of panic that crushed us yesterday — currency, yields and earnings — still have not been resolved, despite the nice bounce today," Cramer said. "I think we've got more wood to chop before we can have a sustainable rally."
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Cramer called out investors that he said broke a handful of rules in after-hour trading.
The host shined a light on big tech stocks that were sold off after Monday's 4 p.m. market close by as much as $10 under their 9:30 a.m. opening share prices the next day.
"These sellers ended up fleeing at the worst possible moment. They violated every rule in the book," Cramer said. "I don't want you to repeat their mistakes, so let's go over everything these dopes did wrong."
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Etsy shares tumbled double digits last week on a mixed second-quarter report, but CEO Josh Silverman said the period marks a turning point for the e-commerce company.
"I think it was a great quarter," he said in an interview with Cramer. "In fact, I think when people look back a few years from now, they're going to describe this as a breakthrough quarter."
Gross merchandise sales at the online marketplace grew 21% and revenue, which fell short of Wall Street's estimates, improved by 37% year-over-year, according to FactSet. Shareholders made 14 cents per share.
Silverman said the quarter was driven by its delivery process and marketing initiatives.
"In addition, we announced three bold new initiatives this quarter, each of which I think set us up for really great growth for the future," he said. "So we feel great about the second quarter."
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In Cramer's lightning round, the "Mad Money" host faced a live audience to give them his thoughts on their favorite stock picks of the day.
eBay: "I think eBay's going to have a good quarter. I genuinely think that what's going to happen is that they're going to be able to sell StubHub and get a much bigger price than anybody thinks. I want you to stay on it."
Funko: "Funko [had] an unbelievable quarter and yet the stock didn't go up. I don't know. If you get a couple more unbelievable quarters and it doesn't go up, I'm going to have to tell you to cut and run."
PayPal: "I think PayPal's come down a great deal from the top, but I'll tell you the truth: I like MasterCard more ... You're not going to go wrong with PayPal, though ... If you can get it in the $90s, that'll be a home run."