"You can't have your protectionist cake and eat it, too. Meaning, when it comes to trade policy there is no scenario where everyone is a winner," the "Mad Money" host said.
President Trump met with major automaker CEOs on Tuesday to urge them to build more plants domestically, saying these plants could ignite economically depressed towns and spur manufacturing in the U.S.
However, if the president only goes after domestic automakers then these companies will be at a disadvantage to the foreign competition who can build cars in places like Mexico. Cramer feared American auto companies could become losers.
"There is already too much capacity, so this is a sucker's game for all the auto manufacturers in the room. The next targets need to be the foreign car companies … which spend billions in Mexico to take advantage of the ridiculous currency differential," Cramer said.
Trade issues are all about trade-offs, Cramer said. When a tariff is put on foreign goods, like the one President Obama introduced to Chinese companies dumping steel, then U.S. steelmakers get an earnings boost.
At the same time, the buyers of that steel will have to raise prices and make their goods more expensive. Unless competitive imports are shut off or have a tariff put on them, buyers of the product could be hurt versus overseas competitors.
While Cramer did not dispute the idea of putting more people to work in America, he couldn't ignore the gains that come from free trade. It means cheaper goods for everyone.
"I'm not picking sides here. I am saying there is no free lunch in this business. As a stock guy — not an ideologue — I can tell you that I simply cannot recommend Ford or GM … if they are going to have to close plants in Canada and Mexico and bring back those jobs to America," Cramer said.
This is especially the case if their foreign competitors continue to build cars in places like Mexico.
However, if U.S. companies get the big tax breaks that Trump wants and can repatriate overseas money and have less regulation, then Cramer recommended owning the stocks.
"Right now, Ford and GM are in a no-win situation that could severely impact the affordability of their cars versus those foreign automakers that weren't around the table today," Cramer said.
Cramer wants to buy American, but he also wants American companies to be able to sell American. He questioned how this could be possible for companies with "one hand tied behind their back."