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I doubt the stock market can absorb much higher tariffs, Jim Cramer says, but a China deal could provide a 'major boost'

Key Points
  • "When you consider how high this market is, I doubt it can absorb much higher tariffs," CNBC's Jim Cramer says.
  • "If the Chinese really are eager to make a deal, well that would give the averages a major boost," the "Mad Money" host says.
  • "I think that as long as the interest rates stay low ... this sense of optimism can sustain itself until we get some bad news on the China front," he says.
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I doubt the market can absorb much higher tariffs, says Jim Cramer

CNBC's Jim Cramer said Tuesday that President Donald Trump's willingness to raise tariffs on Chinese imports was the "more important" statement that the leader of the free world made in a speech earlier that day.

In an address a the Economic Club of New York, Trump signaled that U.S. and China negotiators were "close" to settling on a so-called phase one trade deal, but threatened to increase tariffs "very substantially" if one does not come to fruition.

"When you consider how high this market is, I doubt it can absorb much higher tariffs," the "Mad Money" host said. "But if the Chinese really are eager to make a deal, well that would give the averages a major boost."

Cramer went on to explain varying "glass half full" and "half empty" perspectives on the latest developments in the ongoing U.S.-China trade war. The pessimistic glass-half-empty cohort forecast that more pain is in the works as the December tariff hikes could go into effect. The optimistic glass-half-full contingent is banking on Trump's tease that a breakthrough in trade talks is nigh.

However, there is a "glass-totally-full camp" that Cramer said thinks a trade truce between the world's largest economies is imminent, pointing to positive comments the president's chief economic advisor Larry Kudlow made on CNBC Tuesday.

"When Larry spoke to CNBC later in the afternoon, he talked about how there could be some real agreement going on ... [and] made it sound like [it's] just a matter of time before we get a deal," said Cramer, noting how the market swung up and down and up again during Trump's speech. "I think the optimism of this third group is almost unhinged."

The S&P 500 hit an intraday low of 3,084.73 before finishing Tuesday's trading session up 0.16% at 3,091.84.

"I think that as long as the interest rates stay low ... this sense of optimism can sustain itself until we get some bad news on the China front," he said. "Of course, if there's a major trade deal, the glass-is-full crew will turn out to be right — otherwise they're going to be too bullish unless some fresh money comes in to take us higher regardless."

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I doubt the stock market can absorb much higher tariffs, Jim Cramer says

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