Shares of Mexican restaurant chain Chipotle Mexican Grill (CMG - Get Report) closed down 2.77% to $641.66 Monday after the company's chief financial officer warned that its 2019 costs could rise about $15 million and prices could go up if President Donald Trump's proposed tariffs on Mexican imports go into effect.
Chief Financial Officer Jack Hartung warned in a statement that in addition to margin improvements "already underway," the Newport Beach, California-based company could also "consider passing on these costs through a modest price increase, such as about a nickel on a burrito, which would cover the increased cost without impacting our strong value proposition."
Trump last week said he'd impose tariffs on Mexican imports to the U.S. -- from 5% to potentially 25% by October -- if the southern U.S. neighbor didn't stop illegal and undocumented immigration across its border to the north.
Mexico is the largest supplier of agricultural produce to the United States, exporting more than $8 billion worth of vegetables last year, including $2.07 billion worth of avocados, Reuters said, citing U.S. census bureau statistics.
Chipotle said in its annual report that "a substantial volume of produce items are grown in Mexico and other countries, and a significant portion of our meats and restaurant supplies are sourced from outside the U.S. as well."
"Any new or increased import duties, tariffs or taxes, or other changes in U.S. trade or tax policy, including any new or increased export duties, tariffs or taxes, or other changes in trade or tax policy as a result of retaliation by the countries from which we source our ingredients in response to such changes in U.S. trade or tax policy," the company said, "or any localized labor disturbances or political unrest in the areas from which we source our ingredients, could result in higher food and supply costs that would adversely impact our financial results."