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CNBC’s Jim Cramer said on Friday he does not believe that Wall Street actually thinks President Donald Trump is going to slap a 5% tariff on all of Mexico’s imports.
Otherwise, he said, “The market should be down much more.”
The Dow Jones Industrial Average was dropping about 300 points early Friday, the last day of a terrible May that saw the Dow sink more than 5.3% as of Thursday’s close.
Cramer said that “markets may be wrong” since traders did not think the president would follow through on threats to hike tariff rates to 25% on $200 billion of Chinese goods.
But earlier this month, he did.
Trump tweeted Thursday evening that he would impose a 5% tariff on Mexican imports, beginning next month, if Mexico does not take action to “reduce or eliminate the number of illegal aliens” crossing into the U.S.
Last year, Mexico was the second-largest importer of goods into the U.S., according to the Office of the U.S. Trade Representative. The U.S. imported $346.5 billion of Mexican goods last year, and the total accounted for 13.6% of 2018’s overall imports.
Trump’s new Mexico threat came out of left field and it’s “all kinds of astonishing,” Cramer told “Squawk Alley. ” But if the markets thought the president were really serious, Cramer said he would expect to see General Motors down 15%. In early trading, shares of the automaker were only down about 4%.
Three of the top U.S. automakers, General Motors, Ford and Fiat Chrysler, each have billions of dollars at stake from having production and suppliers in Mexico.
“Automakers may indeed see large financial impact and uncertainty from the tariffs, as all major OEMs [original equipment manufacturers] import a considerable portion of the vehicles they sell in the U.S. from Mexico,” Deutsche Bank warned Friday. It added GM imports 29% of its total car and truck parts from Mexico.
Cramer said he believed Trump is using tariff threats as a way to move plants away from Mexico and back to the U.S. Working to stop illegal immigration and bringing jobs back is a “double win” for the president who promised immigration reform on the campaign trail, the “Mad Money” host said. The Trump administration thinks the “jobs are going to come back” following the latest threats — “you shouldn’t doubt me on this,” he said.
