Trump's Mexico Tariff Could Utterly Screw Chipotle
Chipotle gets around 70 million pounds of the 99 million pounds of avocados it uses each year from Mexico.
Photo via Flickr user kennejima
Chipotle had best call in an astrologer, a feng shui specialist, and a past life regression therapist or two because things have not been going well for them as of late.
First, an intractable food safety crisis struck the chain, driving its stock price down more than 20 percent. Revenues dropped 14.8 percent in the third quarter of 2016. And now, an analyst is reporting that Chipotle could very well bear the brunt of President Trump's announcement that he may impose a 20 percent tariff on Mexican goods entering the US to fund the wall he'd like to build to attempt to keep out illegal Mexican immigrants.
Instinet analyst Mark Kalinowski said he believes Chipotle gets around 70 million pounds of the 99 million pounds of avocados it uses each year from Mexico. A price increase thanks to a tariff would be problematic for the chain, to say the least.
And it's not just Mexican avocados that could put economic pressures on the chain. Kalinowski wrote in a note published Tuesday, "Our belief is that the company generally obtains about 70-90 percent of its avocados from Mexico, all of its limes, the majority of its jalapeño, less than half of its tomatoes, and small amounts of other items (e.g., cilantro)."
Bottom line: "Should a 20 percent tariff be enacted for goods imported from Mexico, Chipotle likely would bear the biggest brunt of this potential impact on food costs compared to the other companies we cover."
Trump has said that a border tax is just one of the options he is exploring to fund his promised wall. Because of how the tax would affect food costs, many stateside food retailers are hoping that the President will drop the tariff. Previously, he insisted that Mexico would pay for the construction of the wall, but Mexico's president fired back by clarifying that there was no such plan and then cancelling a meeting with Trump last week.
MUNCHIES reached out to Chipotle for comment, and received the following statement: "Any impacts or projections stemming from this tax are purely speculative as this tariff is nothing more than a proposal. There are a host of variables that can impact upon food costs (weather, supply and demand, and public policy decisions, among others). If any events impact our food costs in material ways, we'll make that information available in a timely fashion, but we're not going to speculate about what any of these events might mean."
Is the priest from The Exorcist available? Because Trump's wall may be causing a heap of collateral damage on a homegrown American business with more than 45,000 employees.