A Chipotle burrito could cost customers an extra nickel if President Trump’s proposed tariffs on Mexican goods go into effect.
Continue Reading Below
The tariffs on Mexican goods could negatively impact the Mexican fast-casual chain and could increase costs by about $15 million this year and reduce margins by 20 to 30 basis points, CFO Jack Hartung said in a Monday statement.
Trump announced Thursday plans to impose a 5 percent tariff on all goods from Mexico starting June 10 to stop the flow of illegal immigrants and drugs into the U.S. The tariff will gradually increase in the next months to 25 percent if Trump does not see positive results.
“If the tariffs become permanent, we would look to offset these costs through other margin improvement efforts already underway,” Hartung said Monday.
|CMG||CHIPOTLE MEXICAN GRILL INC.||775.94||+9.16||+1.19%|
Hartung said a “modest” price increase on items, such as an extra 5 cents per burrito sold, is one way to cover the cost “without impacting [the chain’s] strong value proposition.”
“We know that we could easily solve the volatility in our supply chain by purchasing pre-mashed or processed avocados which would be cheaper, readily available and provide stability, but we are committed to our brand purpose and upholding our food with integrity principles,” Hartung said in a statement provided to Fox Business.
“We believe that using whole, fresh ingredients and making guacamole by hand in our restaurants each day leads to better-tasting guacamole that our customers deserve and expect from Chipotle,” he concluded.
A Chipotle burrito could cost as little as $6.80, depending on the meat selection and other toppings, such as guacamole, which is an extra $2.05 at most locations.
The proposed tariffs not only could drive up prices for avocados and tomatoes, two ingredients Chipotle often uses in its food, but other products such as strawberries and lemons. The U.S. imported more than $2 billion worth of each item from Mexico, The Wall Street Journal reported.
“Consumers have come to be used to having mangoes, avocados and tomatoes year round. Mexico is a big part of being a solution for that,” Richard Owen, Produce Marketing Association’s vice president, told The Journal on Friday.
As Trump continued his visit to the United Kingdom on Monday, a high-level delegation from the Mexican government convened in an attempt to convince the U.S. to not go through with the proposed tariffs. Mexican officials have argued that the move will hurt both countries’ economies.
Trump tweeted Sunday prior to his London trip: “Mexico is sending a big delegation to talk about the Border. Problem is, they’ve been 'talking' for 25 years. We want action, not talk. They could solve the Border Crisis in one day if they so desired. Otherwise, our companies and jobs are coming back to the USA!”
The Associated Press contributed to this report.