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U.S. avocado lovers expected to foot the bill for Trump tariffs

A truck carrying crates of avocados sits parked in Periban, Mexico, on Nov. 12, 2018. (Cesar Rodriguez/Bloomberg)

Get ready to pay more for Mexican avocados. That’s the word from producers and sellers south of the border after President Donald Trump’s threats to slap tariffs of as much as 25% on Mexican goods.

The tariff threats come at a particularly difficult time for the avocado market. A tough season has squeezed supply and pushed up prices, according to half a dozen sellers in Mexico City’s busy wholesale market.

Such a tight market means producers in Michoacan, the heartland of Mexican avocado production, won’t lower their prices to offset tariffs. They know there aren’t many avocados to go around and demand won’t dwindle. As a result, producers and sellers in Mexico see the cost being passed on to U.S. consumers.

“Trump doesn’t know what he’s doing,” said Michoacan-based producer Humberto Solorzano, who is also a founding member of AvoPrice, a platform to monitor prices real time. “With the market as it is right now, his play is going to backfire. He’s raising prices to his own people.”

The threats haven’t moved prices just yet. A weakening Mexican peso also helps offset any initial tariffs for U.S. buyers, according to David Magana, a vice president and senior analyst at Rabobank.

But inevitably, prices will move higher if tariffs are introduced, Solorzano said. “At least in the coming months, the few producers who have avocado will be in control,” he said. Supply is likely to grow in November and December, which might reverse the dynamic.

The scene at Mexico City’s sprawling wholesale market, Central de Abastos, underscores the avocado shortage. Amid many dozens of stands selling all kinds of fresh fruit and vegetables, it was surprisingly hard to find the dark green-colored, bumpy-skinned of the Hass variety that is preferred in guacamole and avocado toast for its rich, creamy flesh.

On Friday morning, some sellers there weren’t really aware of Trump’s late Thursday announcement. Any news that can impact pricing, especially from the U.S., takes about a week to reflect in prices on the ground, seller Benjamin Sanchez said.

The last time Trump threatened Mexico on immigration with a border-closing warning in April, a gauge of avocado prices skyrocketed as buyers stockpiled. Sanchez saw that with his own eyes. “Customers that usually fill up a single truck would come in with two or three trucks,” he said.