Why Trump's tariffs on Mexico would mean higher avocado prices at the grocery store

Of all the products that would be affected by President-elect Donald Trump’s proposed tariffs on Mexico, avocados stand out: 90% of avocados consumed in the U.S. are imported. And almost all of those imports come from Mexico.

Trump has said he plans to impose a blanket tariff of 25% on imports from Mexico and Canada, along with an additional 10% tax on goods from China.

It’s unclear whether the tariffs will be implemented or if they will serve merely as a negotiating tactic.

If enacted, they could have multiple effects on the avocado industry.

“Broad tariffs, like what’s being proposed, is not something that we’ve seen” before, says David Ortega, a food economist and professor at Michigan State University. “We had the trade war with China back in 2018 that affected steel and aluminum, but when it comes to food, these types of policy proposals are not something that are very common or that we’ve seen recently.”

With one of the biggest guacamole-eating events of the year — the Super Bowl — approaching in February, here’s what to know about avocados, tariffs, and why so many avocados are grown in Mexico.

Prices will rise

Avocados are displayed in a grocery store in Washington, D.C., on June 14, 2022. Experts predict avocado prices will rise in the event of tariffs on Mexican imports.

Stefani Reynolds/AFP via Getty Images

hide caption

Advertisement

toggle caption

Stefani Reynolds/AFP via Getty Images

First, a 25% tariff on imports from Mexico would lead to higher avocado prices at the grocery store.

But estimating just how much higher is hard to say. It’s possible that producers and importers will absorb some of the costs to keep prices down and stay more competitive.

Ortega says there could be “pretty significant increases in the price of avocados. Maybe not the full 25%, but pretty close, given that there’s very little substitute ability with regards to where we would source avocados.”

But he cautions that because the tariffs apply only to the product’s value at the border, and not to other costs like transportation and distribution within the U.S., prices may not go up by the full 25%.

Regardless of these potential price increases, however, people in the U.S. love their avocados and they’re willing to pay more. Avocado consumption tripled in the U.S. between 2000 and 2021.

“Given that avocado is a staple of our consumption here, I would say that the elasticity is not very high, meaning that even with a big increase in price, consumption is not going to change that much,” says Luis Ribera, a professor and extension economist in the agricultural economics department at Texas A&M University.

Why Mexico

A farmer works at an avocado plantation at the Los Cerritos avocado group ranch in Ciudad Guzman, state of Jalisco, Mexico, on Feb. 10, 2023. Most of the avocados consumed in the U.S. are grown in Mexico.

Ulises Ruiz/AFP via Getty Images

hide caption

toggle caption

Ulises Ruiz/AFP via Getty Images

Advertisement

Mexico is the biggest producer of avocados in the world and exported $3.3 billion worth of avocados in 2023. A study funded by the industry estimated that avocado production supports 78,000 permanent jobs and 310,000 seasonal jobs in Mexico.

“It’s a very important business in Mexico, very lucrative,” Ribera says.

Mexico emerged as the largest foreign supplier of fruits and vegetables to the U.S. for a few reasons, he says. One: Its proximity to the U.S. market. With a perishable product, closer is better. Peru is the second-largest source of foreign avocados in the U.S., but its greater distance means avocados need to be shipped farther.

The other reasons for Mexico are favorable weather that allows for year-round production of avocados and access to cheap labor, according to Ribera.

Avocados are grown in the U.S. too, mostly in California and to a lesser extent Florida and Hawaii, but U.S. growers can’t meet Americans’ big appetite. Avocado production in the U.S. has declined, even as Americans grew fonder of the green fruit, according to the USDA.

California avocado growers have faced droughts and wildfires in recent years, making it difficult to offer the year-round availability that American consumers crave, Ortega says. In addition, land is expensive and water is limited.

If the goal of implementing tariffs is to force avocado production to move somewhere besides Mexico, that isn’t easy.

It takes about eight years for avocado trees to produce fruit, according to the USDA. “This is not a product that you can just simply plant more of this season and you get more of in a few months,” Ortega says.

Other countries where the U.S. sources avocados — Peru, the Dominican Republic and Chile — “just simply don’t have the production capacity to replace Mexico’s supply,” he says.

Tariffs could impact the organic avocado market

Tariffs could also alter the market dynamic when it comes to organic vs. conventional foods.

If prices rise across the board, consumers who typically buy organic avocados might switch to conventional ones to save money. Organic produce makes up about 15% of total fruit and vegetable sales in the U.S., according to the Organic Trade Association, which represents hundreds of organic businesses and thousands of farmers.

“My hypothesis is that the price of conventional products would increase more than the premium organic product,” Ortega says. He reasons that because people who are used to buying organic avocados would move to buy conventional ones, “that in turn increases the demand and would make prices rise more for that category.”

Matthew Dillon, co-CEO of the Organic Trade Association, says those in the organic food industry are looking at diversifying their supply chains away from Mexico, but there’s a three-year transition period required for farmers to switch from producing conventional to organic produce.

“Supply chains are not incredibly elastic in organic. It takes more time to pivot and change when there’s a supply chain disruption. And tariffs are in some ways a form of supply chain disruption for a company, because it creates unpredictable pricing,” he says.

Together with grocery prices that have gone up more than 26% since the start of the COVID-19 pandemic, Trump’s plans for tariffs on Mexico, along with mass deportations, could create “a perfect storm of high inflationary pressure on the organic sector,” Dillon says.

Furthermore, retaliatory tariffs from Mexico could have their own impacts.

Avocado producers face uncertainty as Trump’s return looms

Avocados in boxes are pictured at a packing plant in the municipality of Ario de Rosales, Michoacan state, Mexico, on Sept. 21, 2023.

Alfredo Estrella/AFP via Getty Images

hide caption

Advertisement

toggle caption

Alfredo Estrella/AFP via Getty Images

Aside from the threat of tariffs, the avocado industry has other challenges to deal with: climate change presents several problems, and avocados require a large amount of water to grow. Meanwhile, environmentalists say some avocado growers are cutting down forests to plant avocados.

Producers also face extortion from criminal gangs in Mexico.

And now with Trump’s tariff threats, producers are left to wonder about their next steps.

“Producers, they react to market fundamentals,” Ribera says. For example, people can foresee how bad weather in Mexico would affect avocado prices. Producers and retailers will adjust to higher and lower demand.

“The issue with a tariff is it’s not a market fundamental — it’s a policy. It’s a political move,” he says. “It could happen or it could not happen, or it could be increased or it could be decreased, you know. So it’s hard for the whole supply chain to adjust.”