Despite the popularity of Hillary Clinton in the polls prior to the election, Jim Cramer earlier this week advised investors to be prepared for a Donald Trump surprise victory.
The one stance that stood out to Cramer from Trump's platform was his stance on Mexico. Trump plans to build a wall along the border and attempt to renegotiate the North American Free Trade Agreement (NAFTA).
"What matters for the market is that in the scenario where Trump wins the White House, he is likely also going to have Republican majorities in the Senate and House of Representatives, which means if he wants to build a wall and renegotiate NAFTA, he'll probably be able to," the "Mad Money" host said.
Cracking down on Mexican exports would likely boost American manufacturing jobs, but it could also make products more expensive for U.S. consumers.
This means a company like Cemex — a Mexican company that is one of the world's largest manufacturers of cement and concrete — could be hurt substantially under a Trump presidency.
The thing to keep in mind is that if we toss NAFTA down the drain, it won't just be Mexican exporters that get hurt. Their whole economy will be put through the meat grinder, and the value of the peso is going to plummet.Jim Cramer
Historically, NAFTA has been good for Cemex. Every time an American company moves its manufacturing operations south of the border, a company like Cemex helps to build facilities.
"I would say that Cemex is the perfect example of the kind of company that gets hurt if Trump wins the White House, except for one thing — the wall," Cramer said.
If Trump does actually build the border wall and gets Mexico to pay for it, Cemex could be the supplier of choice for concrete. Still, Cramer does not think that is enough to offset the damage that could occur by renegotiating NAFTA.
Another stock that could be impacted negatively by a Trump regime is Kansas City Southern, the main railroad that connects Mexico to the U.S. A large wall could hinder the very transportation routes that Kansas City Southern relies on.
Additionally, Trump's stance on Mexico could lead to tariffs on Mexican exports, Cramer said. In turn, this would mean fewer imports of goods from Mexico. Given that Kansas City Southern gets nearly half of its revenue from Mexico, any change to NAFTA could seriously impact its numbers.
"The thing to keep in mind is that if we toss NAFTA down the drain, it won't just be Mexican exporters that get hurt. Their whole economy will be put through the meat grinder, and the value of the peso is going to plummet," Cramer said.
Cramer also pointed to EWW, the iShares Mexico capped ETF, as a possible Trump victim. It has risen recently on the probability that Clinton declares victory. In the event Trump wins, Cramer expects the ETF to get hammered.
"If he managed to pull off a surprise win ... you need to sell Kansas City Southern and the iShares Mexico Capped ETF. KSU in particular would make a terrific Trump short," Cramer said.
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