Jim Cramer: The Real Deal About Tariffs

 | Mar 22, 2018 | 6:16 AM EDT
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Here's the real deal with the tariffs you keep hearing about. The wealthiest people in this country -- the ones who actually own stocks -- have done quite well by free trade. Having a president in there opening doors for more trade, trying to get deals done has become the American way. In fact, our presidents, especially the last one, and many of our business leaders, believe it is our duty to help elevate the world's people. For some it is humanitarian, for others it is profitable as well as humanitarian.

President Trump does not share that orthodoxy and it is dawning on the wealthy elites that the free ride might be over.

Whole companies, fabulous companies, like FedEx (FDX) , like Starbucks (SBUX) , have relied on that open door policy to expand their businesses and everything the president initially did since he was elected helped those businesses.

The combination of corporate tax cuts and repatriation were huge boosts to all companies, not just the domestic ones, and you could sense -- palpably -- how confidence soared when the president got his way on these key tax issues.

And then he announced the tariffs.

These aren't in the elites' playbook. None of them. They are anti the religion of free trade and the elites have seen their worlds rocked.

The world has been unfair to US commerce for years. NAFTA's been terrible for the working person because while product is cheap at the stores, no manufacturer in this country -- unionized or non-unionized -- is going to be able to compete with Mexico with a stable, educated workforce making on average $5 an hour with no unions, no health care costs and very very little absenteeism and a currency that's 18 to one on the U.S. dollar.

No market has 1.3 billion people like China where every year tens of millions become wealthy enough to buy an Apple (AAPL) iPhone or travel on Boeing (BA) planes. Sure they steal our secrets, yes they take our manufacturing jobs, but boy oh boy do we make money there. Starbucks is ingrained. FedEx is a shipping company of choice for our markets. The idea of a dollar tariffs on Starbucks, something I asked CEO Kevin Johnson about, seemed fanciful 18 months ago. Now it seems plausible. FedEx planes being made to sit on the tarmac while Chinese shippers roll on? It's suddenly within the realm. And it doesn't need to be announced.

That's why a Fred Smith from FedEx says that if we are worried about not having enough steel and aluminum for fighter jets or tanks then let the Defense Department buy those materials rather than be sure the plants don't close. There's a lot at stake for the new, now threatened, American way.

Or to put it another way, Washington, for years, has agreed with the elites about how to amass fortunes; Washington has agreed with elites about international trade, smart kids coming out of school for years even understood the imperative of this regime which I would summarize as "they," including China, will let you sell a lot of product as long as you let them have the run of the manufacturing joint-and now you have a president who is saying "no that's no longer the case. That's not how it is going to be done any more."

And what happens? I think you are seeing the dangers of the stock market surface, because President Trump is turning the world of the elites upside down and their confidence is being rocked and they are turning sellers. At the same time the non-wealthy working people who could be helped by these new policies do not have the money to take the other side of the trade even if their confidence is emboldened.

This decline, this turmoil, isn't about the Fed. The hikes are a fact of life. It's about how Trump just pulled the comfy tax cut rug out from under the elites. It's not about a quarter point here, it's about a 25 cent tariff on a latte. It's not about three more hikes. It's about three hours on the tarmac. It's not about Jay Powell, it's about President Trump.

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