Chipotle Mexican Grill Inc. estimated the cost of President Donald Trump's proposed tariffs on its business at around $15 million on Monday and said it could cover them by raising burrito prices by around 5 cents.
The U.S.-based Mexican-themed chain's finance chief Jack Hartung said its margins would be reduced by 20-30 basis points if the tariffs suggested by Trump are enacted, pushing up prices of avocados and other imports.
Mexico is the largest supplier of agricultural produce to the United States, exporting more than $8 billion worth of avocados and other vegetables north last year.
"We know that we could easily solve the volatility in our supply chain by purchasing pre-mashed or processed avocados," Hartung said in an emailed response to Reuters questions.
"But we ... believe that using whole, fresh ingredients ... leads to better tasting guacamole."
For an interactive graphic on border crossings and cross-border trade, click here: https://tmsnrt.rs/2Khd82D
Chipotle is among the first U.S. companies to warn of pressure on prices from Trump's commitment last Thursday to impose a 5% tariff on all goods coming from Mexico unless illegal immigration across the southern U.S. border halts.
"We could also consider passing on these costs through a modest price increase, such as about a nickel on a burrito," Hartung said.
The company did not respond to questions on whether it would consider sourcing avocados outside of Mexico.
Chipotle's shares (CMG) fell marginally in early trade on Monday, having lost 3% on a broadly weaker New York Stock Exchange on Friday.
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