Why Chipotle may raise burrito prices

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WASHINGTON — If President Donald Trump’s proposed tariffs on Mexican products go through, Chipotle burritos could get a little more expensive.

Trump said last week that unless “the illegal migration crisis is alleviated,” a 5% tariff on all goods imported from Mexico would kick in on June 10. After that, they would continue to increase, potentially reaching 25% by October.

That’s bad news for Chipotle. If the threatened tariffs are put in place, the company’s costs would rise $15 million this year, pinching its profit margin, Chipotle Chief Financial Officer Jack Hartung said in a statement Monday.

He added that if the tariffs become permanent, Chipotle “could also consider passing on these costs through a modest price increase, such as about a nickel on a burrito.”

Chipotle would try to offset the costs by continuing its current efforts to improve margins, Hartung added.

Mexico is a major exporter of avocados and other agricultural products that are important to Chipotle’s menu.

Hartung said 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, he noted, doing so would lower the quality of Chipotle’s food.

“Using whole, fresh ingredients and making guacamole by hand in our restaurants each day leads to better tasting guacamole,” he said.

Other companies — and consumers — would get hit by the tariffs too.

The United States imported $59 billion of auto parts from Mexico last year and an additional $52 billion in completed cars. Deutsche Bank estimates that if the tariffs reach 25%, it will add an average of $1,300 to the price of US cars.

Beer drinkers could also end up spending more: Over two-thirds of the beer that the United States imported in 2018 came from Mexico, up from around 35% two decades ago, according to the National Beer Wholesalers Association.

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