Mad Money

Cramer tries to decode Trump's trade strategies with 5 new theories

Key Points
  • "Mad Money" host Jim Cramer breaks down how President Donald Trump may be approaching United States trade policy.
  • Cramer presents five theories that could give investors a glimpse into the president's thinking.
Decoding Trump's trade strategies

Sometimes, even CNBC's Jim Cramer struggles to understand President Donald Trump's trade strategies and how they could affect stocks. So, on Monday, he came up with five new theories.

1. G-7 Summit

For one, the "Mad Money" host wondered why stocks didn't fall Monday after tensions flared between Trump and other world leaders present at the G-7 Summit meeting, including the prime minster of Canada, a longtime U.S. ally.

"What does it mean to anger the leaders of America's traditional allies so much that they feel compelled to respond in public? Does Trump want to end the G-7?" Cramer asked rhetorically.

"Here's my hypothesis: yes, the president doesn't really care for many of these leaders," he said. "In his view, the United States has been propping up Europe for decades, and for what? The Cold War is over, so why keep having a Cold-War-style foreign policy?"

Cramer connected this sentiment to Trump's call for Russia to be added back into the G-7 cohort, restoring what was the G-8 before Russia was pushed out for its 2014 annexation of Crimea.

"He thinks Russia can do more to help the United States than Germany, and unlike the Germans, Russia has no equivalent of BMW or Mercedes," Cramer said, referencing Trump's reported statement that he wants to stop German luxury auto imports.

"Let me put it like this: as Trump sees it, the Russians can help keep down the price of oil," he continued. "What can the Germans do for us? He'd probably say nothing. Yes, that's how he thinks."

2. China chaos

Cramer also wondered why Trump would allow White House officials to issue conflicting statements on the United States' ongoing trade talks with China.

But then, the "Mad Money" host remembered his time as a judge on "The Apprentice," where "Trump frequently — and needlessly, frankly — tried to pit one contestant against another," thinking that rivalry would generate the best results, Cramer said.

It's no secret that Trump views "The Apprentice" as a success, so Cramer argued he must consider this methodology a success, too.

"Here's how things look through Trump's prism: Contestant Steve Mnuchin and Contestant Peter Navarro, they've hung on for a while. Contestant Gary Cohn was fired real early. Contestant Larry Kudlow is moving up rapidly," Cramer said. "People trying to relate this West Wing reality show to the stock market are being way too serious, not about the stock market, but about the White House."

3. China goals

What does Trump really want from China? Cramer's best guess centered around intellectual property, which many have pegged as the real thrust of the trade talks.

"The only way to anger the Chinese to the point where they give up and just totally remove themselves from any possibility of trade cooperation is to ban any investment by the Chinese into the United States," Cramer said.

"That will most likely happen by the end of this month," he added. "That's right, I think by the end of the month, China won't be allowed to buy any American companies of any size."

4. Germany goals

As for Trump's threat to place tariffs on European car imports, which would drastically affect German automakers, Cramer said it stemmed from protectionist — and possibly financial — goals.

"To me, that's all about ultimately blocking the import of their cars into the U.S. if they've been made in overseas factories built since he became president," he said. "He may just say that you have to pay more than 10 percent on a Mercedes or a BMW ... if the majority of it is not made in the U.S."

5. Stocks

Finally Cramer addressed his own burning question: "Why isn't this crushing the stock market?"

Perhaps it's because Trump likes keeping key stakeholders, namely his allies, his friends, and his enemies, off balance, the "Mad Money" host suggested.

"Plus, judging from today's positive actions, there are plenty of investors who clearly aren't worried about these things," he said. "At the end of the day, though, President Trump thrives on chaos, and whether you voted for him or not, that's the world we're in now. Can it really be that simple or that simplistic? You bet it can."

WATCH: Cramer tries to decode Trump's trade strategies

Cramer tries to decode Trump's trade strategies with 5 new theories

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