It’s effectively a tax on partying: Just in time for summer in the U.S., the cost of chilling out with some guacamole and a margarita is about to go up for consumers.
President Donald Trump on May 30 issued a new threat to slap tariffs of as much as 25% on goods from Mexico, an escalation in his trade war that would raise the prices Americans pay for avocados and tequila.
Autos are by far the largest category of Mexican-made products sold in the U.S., and top manufacturers from Audi AG to Volkswagen AG produce vehicles in the country. Oil refineries in Louisiana and Texas, as well as builders reliant on imported steel, could be hit.
At the same time, Mexico also is a big supplier of fruit and drinks, and Trump’s latest volley may, therefore, mean less joy in Margaritaville this summer.
Americans should be prepared to pay more for guacamole, avocado toast and many other items at restaurant chains like Chipotle Mexican Grill Inc. or Panera Bread Co. The fruit is on almost half of U.S. menus, according to Chicago-based researcher Datassential, and Mexican imports accounted for more than three-quarters of the U.S. avocado market last year, according to the Hass Avocado Board. Prices spiked last month as Trump was threatening to close the border.
Mexico is a favorite location for some of the world’s top makers of TVs. Samsung Electronics Co. makes about 9 million sets a year from Mexican factories and LG Electronics Inc. makes about 4 million, according to Eric Chiou, a Taipei-based analyst with WitsView. Higher tariffs will hit these companies, which rely on North American sales for about one-quarter of their TV revenues. Taiwanese electronics manufacturer Foxconn Technology Group, which produces about 2 million Sony-branded TVs in the country, has facilities in Baja California and Chihuahua.
New tariffs could slam companies like Constellation Brands Inc. The Victor, New York-based seller of wines and other alcoholic beverages distributes Mexican-made Corona and Modelo brands and had 5.3% of the North American beer market in 2018, according to data from the National Beer Wholesalers Association.
Modelo Especial is the No. 1 imported beer in the U.S., Constellation boasted in a recent press release announcing a partnership with a Chicago-based nonprofit.
Like France with its regulation of Champagne, Mexico strictly controls the branding of tequila. Mexican law mandates that the name tequila only apply to products made from agave sourced from five states in the country.
Prices may rise for Jose Cuervo from Tequila Cuervo La Rojena SA, made in the town of Tequila. Global giant Diageo Plc owns Casamigos, the brand of tequila co-founded by actor George Clooney that London-based Diageo Plc agreed to purchase in 2017 for as much as $1 billion. Diageo also owns Tequila Don Julio, made in the western state of Jalisco.