U.S.: Mexican avocado prices jump after Trump's tariff threat

June 04 , 2019

U.S. President Donald Trump’s threats to raise tariffs on Mexican goods may already be impacting avocado prices, says news publication Bloomberg.

One gauge of the Hass variety from Michoacan, the heartland of Mexican avocado production, increased 3.7% on Monday, notes the publication. This was its highest price since August 2017. Though unchanged last week, the benchmark has already increased 65% this year. Other prices tracked by AvoPrice changed little on Monday.

Considering California's smaller avocado crop this year, Bloomberg stresses that Trump’s move to tax Mexican imports by as much as 25% has the potential to further tighten supplies.

The last time he threatened Mexico on immigration - with a border-closing warning in April - the Michoacan avocado gauge surged.

Avocados don’t trade on exchanges like other relatively opaque fruit and vegetable markets, points out the publication. With this category, prices start with producers.

Sellers surveyed in Mexico City’s wholesale market say the fruit's tough season has already squeezed supply and pushed up prices.

What's more, Bloomberg reports that Michoacan avocado producers aren’t expected to lower their prices to offset tariffs, signaling the taxes would be passed on to U.S. consumers.

When it comes to what this means for businesses, Chipotle Mexican Grill Inc.'s shares sank as much as 2.8% Monday. According to Loop Capital Markets, the popular chain may raise prices to offset the impact of tariffs against Mexico.

 Trump's tariffs could see implications for U.S. growers and produce companies

Of course, this situation could continue to escalate should Mexico respond with retaliatory tariffs on U.S. goods, Bloomberg warns.

Mexico has done so before, during a trucking conflict and in response to steel and aluminum tariffs.

In this situation, it could impose nearly $20 billion in levies from the start. From there, it could raise them each month in tandem with U.S. levels, it cautions.

While some domestic growers might make more money if Mexican competitors are burdened by tariffs, American growers of crops such as apples, cherries, peaches and potatoes would suffer if Mexico chooses to impose countervailing duties, emphasizes the Los Angeles Times.

It adds that American corn, soybean, meat and dairy farmers would be particularly hard-hit.

Many U.S. farming and marketing companies that grow or source in Mexico, including Driscoll’sSunkistNatureSweet and Taylor Farms, stand to suffer if the situation continues to escalate as well, comments the publication.

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