Chipotle Addresses Potential Trump Tariffs and Sources of Avocados

Boxes of avocados are seen at the Central de Abastos market in Guadalajara, Jalisco state, Mexico, on Jan. 31, 2025.

Ulises Ruiz | Afp | Getty Images

Chipotle Mexican Grill has stated that it does not anticipate a significant increase in costs if tariffs on imported goods, including avocados, are implemented next month. The CEO, Scott Boatwright, mentioned that only about half of their avocados are sourced from Mexico.

Recently, President Donald Trump delayed plans to impose a 25% tariff on imports from Mexico and Canada. If these tariffs are enforced after this one-month pause, it would make imports such as avocados and beef more expensive for restaurants, which may lead to higher prices for consumers.

During a conference call regarding the company’s earnings, Chipotle's executives dismissed concerns over potential tariffs. Chief Financial Officer Adam Rymer explained that if tariffs from Mexico, Canada, and China are imposed, Chipotle expects a rise in its cost of sales by approximately 60 basis points, or 0.6 percentage points.

Chipotle sources about 2% of its overall sales from Mexico, which includes various produce items like avocados, tomatoes, limes, and peppers. Notably, while Mexico supplies around 90% of the avocados consumed in the United States, Chipotle's purchasing strategy has diversified. Scott Boatwright pointed out that the company sources about half of its avocado supply from countries such as Colombia, Peru, and the Dominican Republic. In recent years, Chipotle has actively worked to increase its avocado supplies from sources outside of Mexico.

Furthermore, less than 0.5% of Chipotle's sales are sourced from Canada and China. Currently, Trump has already enacted a 10% tariff on imports from China.

Despite the challenges posed by potential tariffs, Chipotle has shown strong performance in recent quarters. The company reported a same-store sales growth of 5.4% in the fourth quarter, driven by a 4% increase in customer traffic. While Chipotle’s earnings exceeded Wall Street expectations, a cautious outlook for same-store sales growth caused shares to drop by 5% in after-hours trading. This outlook did not take into account the impact of any potential new tariffs.

Chipotle, Tariffs, Avocados