business news in context, analysis with attitude

There are a couple of stories this morning about the impact that a border tax could have on US food businesses.

Bloomberg has a story about the "wide range of agricultural goods" that are imported into the US from Mexico, and therefore would be affected by the 20 percent import tax that has been floated as a possibility by the Trump administration.

Among them are fresh vegetables, $4.84 billion of which were imported from Mexico in 2015 ... $4.28 billion worth of fruit ... $2.7 billion worth of beer and wine ... and $1.72 billion worth of snack foods.

The story notes that "despite running an overall trade deficit with Mexico, U.S. food and drink exports to its southern neighbor don’t lag far behind, at $17.7 billion for 2015. The U.S. typically carries a trade surplus with its southern partner in years when grain and oilseed prices are high, as they were for most of the previous decade. Mexico was the biggest buyer of U.S. corn, soybean meal, rice and dairy products in 2015."

And Barron's writes that "a tariff on Mexican imports" could put quick-service chain Chipotle "in the cross-hairs," since the chain "imports tomatoes and avocados from Mexico."

The story notes that "avocado prices have already hurt Chipotle’s results. Earlier this month, the company said its results would be hurt by a spike in the price of avocados caused by a strike in Mexico. It was just the latest challenge to the burrito chain after dealing with food-borne illnesses and management changes over the last year." And Barron's suggests that "along with higher labor costs, a spike in ingredient costs could slow Chipotle’s resurgence."
KC's View:
There are so many questions that need to be answered about this tax, if it even is imposed by the federal government. I think that some folks believe that while it could raise prices, when combined with a corporate tax cut, it'll end up being a wash. But that depends on a lot of things working out perfectly - including consumers getting enough of a tax cut so that they are not bothered by higher prices.

I've talked to a number of senior retail executives in the last week or so, and I've asked them all the same question:

Have you asked your people to compile a list of all the products you sell that come from Mexico, or that contain ingredients from Mexico, so that you at least have a sense of exactly how many items might be affected by an import tax?

They all gave me the same answer:

No.

This sort of surprises me. I'd think you would at least want to know what the landscape looks like before venturing out into it. A map of sorts might be helpful.