Proposed Trump tariff may increase Chipotle burrito prices

The US 'fast-casual' restaurant chain says it may have to raise burrito prices if Trump imposes tariffs on Mexican goods

    The company is preparing to raise prices at its nearly 2,500 stores should President Trump's proposed new trade tariffs on Mexico go into effect [Shannon Stapleton/Reuters]
    The company is preparing to raise prices at its nearly 2,500 stores should President Trump's proposed new trade tariffs on Mexico go into effect [Shannon Stapleton/Reuters]

    A popular restaurant chain in the United States may pass on tariff-related expenses to its customers.

    Chipotle Mexican Grill Inc on Monday said it expects to take a hit of around $15m in expenses should US President Donald Trump impose a 25-percent tariff on Mexico. The company said that the proposed tariffs could force it to increase prices on their burritos by around 5 cents.

    Chipotle operates nearly 2,500 restaurants around the world, the overwhelming majority of which are in the US.

    Last week, Trump announced his administration would impose a five-percent tariff on Mexico in an effort to pressure its southern neighbour to do more to curb migration across their shared border. Trump went further saying tariffs on Mexico would increase to 25 percent by October 1 if Mexico did not act soon.

    Why burrito prices could rise

    A typical Chipotle burrito is made with rice, beans, cheese and vegetables. Consumers pay more to add guacamole to their meal.

    Mexico is the largest supplier of agricultural produce to the US, exporting more than $8bn worth of vegetables in 2018. According to the US Census Bureau, this includes $2.07bn worth of avocados.

    Chipotle's chief financial officer Jack Hartung said its margins could be reduced by 20-30 basis points if the tariffs suggested by Trump go up to 25 percent. Those tariffs could raise the price of avocados - the key ingredient in guacamole.  

    "We know that we could easily solve the volatility in our supply chain by purchasing premashed or processed avocados," Hartung said. "But we ... believe that using whole, fresh ingredients ... leads to better-tasting guacamole."

    SOURCE: Reuters news agency