Tariffs may be justified but that doesn't mean they'll be good for the economy, says Jim Cramer

"Mad Money" with Jim Cramer Summary

Key Concepts: Tariffs, Inflation, Free Trade, Protectionism, Economic Impact, Consumer Prices, Automation, US Manufacturing, American Express, Amazon, Google.

1. Introduction: The Exhaustion of the American Consumer

Jim Cramer opens by stating his mission: to make viewers money. He highlights the growing exhaustion of the American consumer, particularly regarding rising prices. He argues that people are tired of tariffs, which ultimately raise prices. The core question is: "How the heck did everything get so expensive?" Cramer suggests that tariffs are mandating higher prices in supermarkets while potentially lowering prices in the stock market.

2. Trump's Tariffs: A Double-Edged Sword

Cramer acknowledges President Trump's frustration with unfair trade practices, where other countries protect their domestic industries while the US has prioritized cheaper goods. He cites a Washington Post article detailing potential tariff plans, suggesting tariffs of 20% on most imports. Cramer, while sympathetic to protecting domestic industries, expresses concern about the potential consequences.

Quote: "President Trump is justifiably furious about this."

3. The Futility of Tariffs in a Globalized, Automated World

Cramer argues that tariffs may not be effective in bringing back jobs, as many have been automated out of existence. He uses the example of gift wrap paper manufacturing, which was wiped out by Chinese competition years ago due to subsidies. He questions whether tariffs can truly reverse this trend.

4. Five Problems with Trump's Tariff Strategy

Cramer outlines five key problems with the proposed tariff strategy:

• Problem 1: Lack of US Manufacturing: The US "barely makes anything anymore," so tariffs may not protect domestic industries as intended. He questions whether companies like Ford and GM will truly benefit beyond shareholders and union members, and whether foreign companies will simply relocate plants to the US.
• Problem 2: Historical Precedent (Smoot-Hawley Tariff Act): Cramer alludes to the disastrous Smoot-Hawley Tariff Act, suggesting that universal tariffs are historically proven to be a disaster.
• Problem 3: Implementation Challenges: There's uncertainty about how the tariffs will be collected, especially with Customs and Border Protection already focused on immigration.
• Problem 4: Impact on Allies (Canada): Cramer questions why countries like Canada, part of the former NAFTA trade agreement, might be subject to tariffs. He expresses concern about potential retaliation, particularly regarding lumber.
• Problem 5: Consumer Focus on Inflation: Most workers are more concerned about inflation than tariffs. He argues that voters elected Trump because they wanted cheap goods, even if it meant job losses.

5. The Consumer's Dilemma: Cheap Goods vs. Job Security

Cramer argues that Americans have become accustomed to cheap goods, even if it comes at the expense of domestic jobs. He acknowledges his own role in this dynamic, referencing his father's job loss. He suggests that Trump needs to balance his protectionist policies with the consumer desire for low prices.

Quote: "Cheap stuff is what America wanted."

6. Historical Parallels: Herbert Hoover

Cramer draws a parallel between Trump's tariff policies and those of President Herbert Hoover, the last president to implement a major round of tariffs.

7. Stock Recommendations and Market Commentary

• American Express: Cramer recommends holding and buying more American Express, calling it "one of the great franchises of all time."
• Impact of Tariffs and Economic Slowdown: Cramer believes that the strongest and biggest companies will survive potential economic slowdowns and the impact of tariffs.
• Amazon: He notes Amazon's stock decline (from 242 to 192) but doesn't offer a specific recommendation.
• Google: Cramer explains why he no longer recommends Google, stating that he doesn't use it as much as other search engines and services.

8. Conclusion: Questioning Liberation

Cramer concludes by suggesting that people may question what they were "liberated from on Liberation Day," implying uncertainty about the long-term consequences of current economic policies.

Quote: "When the book is written on this moment in time I think we might question exactly what we were liberated from on Liberation Day."