×

Here's why Cramer says Trump would have to change NAFTA to stop US corporations

President-elect Donald Trump will have to refashion the North American Free Trade Agreement if he wants businesses to halt production in Mexico, CNBC's Jim Cramer said on Tuesday.

Earlier on Tuesday, Trump slammed General Motors in a tweet, claiming the auto giant is making a Cruze model in Mexico and then sending them to U.S. dealers tax free. GM responded, "All Chevrolet Cruze sedans sold in the U.S. are built in GM's assembly plant in Lordstown, Ohio. GM builds the Chevrolet Cruze hatchback for global markets in Mexico, with a small number sold in the U.S."

If Trump wants to prevent U.S. companies from operating in Mexico and other low-cost areas, Cramer said the president-elect would have to remove incentives by renegotiating NAFTA, a three-country accord negotiated by the governments of Canada, Mexico, and the United States.

"This is very different from going to a Ford plant — which actually wasn't about to move — and saying, 'Listen, we're going to keep these jobs here.' To bring those jobs back, you have to make it so it is punitive to make anything in Mexico. That means you either have to change the terms of NAFTA or scrap NAFTA." Cramer said on "Squawk on the Street."

Cramer said, however, that the trade agreement is unlikely to change under a Trump administration, considering NAFTA was a bipartisan initiative.

"It's not like Republicans are necessarily now going to turn on NAFTA," He said. "Trump will lose it. He will not be able to change NAFTA overnight."