A Global Trade War Could Boost America's Lunch Bill by $875 Million

 

    Restaurants face higher avocado, tomato and packaging costs

    Levies may exacerbate existing pressures from wages and pork

 

By Leslie Patton, Bloomberg

June 5, 2019

 

The growing threat of an all-out global trade war means Americans may have to fork out more cash at lunchtime.

 

Firehouse Subs will likely bump sandwich prices by 10 cents because of tariffs on to-go packaging it gets from China. The cost is amplified by the fact that about 60% of the company’s orders are for takeout or delivery, according to Don Fox, chief executive officer of the 1,100-store chain.

 

“It’s a critical item for us,” Fox said in an interview. “It might not seem like a lot, but it adds up in a hurry.”

 

Across the industry, tariffs are causing another headache for chains already grappling with higher wages, a dearth of workers and pork prices inflated by an outbreak of African swine fever. Imminent levies on staple imports like avocados and tomatoes, part of the Trump administration’s pledge to punish Mexico for immigration, may add up to $875 million for those two products alone, according to an estimate from A.T. Kearney. This will likely be passed along to consumers in the form of price increases.

 

Like Firehouse, Chipotle Mexican Grill Inc. uses sugar-cane pulp known as bagasse for its burrito bowls and kids’ meals packaging. China is an important supplier of the material, but the tariffs forced the 2,500-store company to diversify its supply chain earlier this year to reduce costs. It’s now also getting bagasse from Taiwan and is looking at other Asian nations as well for supplies.

 

Tomatoes and avocados are a tougher nut to crack, however. Mexico’s geographic proximity and longer growing season has made it a key U.S. supplier for these products. Mexican-grown avocados made up 78% of the U.S. market last year, Hass Avocado Board data show. The U.S.’s southern neighbor also exports significant quantities of cucumbers, berries, peppers, coffee, beef and other food.

 

Chipotle estimates the Mexico tariffs, if enacted, could cost them $15 million this year. The burrito chain would consider bumping menu prices by “about a nickel on a burrito,” according to a statement from Chief Financial Officer Jack Hartung.

 

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https://www.bloomberg.com/news/articles/2019-06-05/guacamole-tariff-of-875-million-will-boost-americans-lunch-tab