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Cramer: Ideological divides could make the US-China trade war 'go on for years'

Key Points
  • The U.S.-China trade war may drag on for years if Beijing does not agree to start buying significant quantities of American goods, CNBC's Jim Cramer says.
  • That would show President Donald Trump that "free-traders have a point and their strategy can still work," the "Mad Money" host says. 
  • "Otherwise, the hardliners win, the trade war keeps dragging on," he says. 
US-China trade war could go on for years due to ideological divide

The U.S.-China trade war continue on for a significant time if Beijing does not agree to start buying considerable amounts of American goods, CNBC's Jim Cramer said Thursday.

"The Chinese keep making the same mistake: they think this is about the balance of trade ...when in reality it's about a whole lot more than that," the "Mad Money" host said.

It is about the free-trade contingent of the American political class versus the populist wing, Cramer said. Those factions exist within both the Republican and Democratic parties, and their approach to ending the long-running trade war varies, Cramer said.

Cramer argued the populists within President Donald Trump's White House will continue to get their way — and tariffs could maybe rise to 30% next month — unless Beijing takes steps to demonstrate the trade between the world's two largest economies is a net benefit.

"How can they get a deal? I think they need to start buying American goods like tomorrow, to show Trump that the free-traders have a point and their strategy can still work," Cramer said, arguing those goods could include "grains, and planes, you name it."

"Otherwise, the hardliners win, the trade war keeps dragging on and ... depending on what happens in the election, it could go on for years," Cramer added.

Within the White House, the free traders include Treasury Secretary Steven Mnuchin and Larry Kudlow, chief economic adviser to Trump, Cramer said.

"These men stand for an open China. They want free and fair trade," Cramer said.

White House trade advisor Peter Navarro leads the populist group, with U.S. trade representative Robert Lighthizer seemingly a "fellow traveler," Cramer said.

They bring to trade negotiations a steadfast belief that any resolution must consist of China making concessions on issues such as forced technology transfers and currency manipulation, Cramer said.

Trump, for his part, talks about how China has for years taken advantage of the U.S. with predatory trade policy, which is "flat true," Cramer said.

At the same time, he said the fact Trump has advisors from both sides of the ideological debate "can make things really confusing."

"And that's why these trade talks are so hard to game," he said.

The two countries agreed to a "phase one" deal in October, but it has yet to be officially signed as the terms of the agreement appear to remain in flux. Chinese officials, for example, argued on Thursday that there should be more tariff rollbacks.

Former Vice President Joe Biden and Sen. Elizabeth Warren (D-MA) react during the Democratic Presidential Debate at Otterbein University on October 15, 2019 in Westerville, Ohio.
Win McNamee | Getty Images

Among Democratic presidential candidates, former Vice President Joe Biden represents the more technocratic, free-trade wing, Cramer said.

Sen. Elizabeth Warren, who is second to Biden in an average of national polls, defines the populist faction.

"From the Chinese perspective, they must be praying for a Biden victory, because he wants to end the trade war," Cramer said.

"Biden thinks the system works fine for the most part. Maybe it needs a few tweaks, but that's it," Cramer said.

But Cramer reiterated his belief that he thinks Warren "might end up being even tougher on China than Trump."

In July, Warren's campaign has released a proposal that would fundamentally alter the way America negotiates international trade agreements.

"If I were the Chinese, I would rather deal with Trump now, than Trump or Warren later," Cramer said.

Jim Cramer: Ideological divides could make the US-China trade war 'go on for years'

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