The tariff proposal, which the Trump administration walked back saying it was just one option being considered, could make goods from Mexico more expensive. That could pose a huge problem for restaurant chains like Chipotle that heavily rely on Mexican imports.
An avocado price increase in particular would be a huge challenge for Chipotle, which goes through more than 99 million pounds of avocados each year — and during some months, sources them exclusively from Mexico.
By Kalinowski's estimate, Chipotle may get as many as 70 million pounds of avocados from Mexico annually.
RELATED: Business leaders react to Trump administration's travel ban:
Business leaders react to Trump administration's travel ban
Business leaders react to Trump administration's travel ban
Bill Ford and Mark Fields, executive chairman and CEO of Ford
"Respect for all people is a core value of Ford Motor Company, and we are proud of the rich diversity of our company here at home and around the world." - Memo to employees
Mark Zuckerberg, Facebook CEO
"Like many of you, I'm concerned about the impact of the recent executive orders signed by President Trump ...
"These issues are personal for me even beyond my family. A few years ago, I taught a class at a local middle school where some of my best students were undocumented. They are our future too. We are a nation of immigrants, and we all benefit when the best and brightest from around the world can live, work and contribute here. I hope we find the courage and compassion to bring people together and make this world a better place for everyone."
"The blanket entry ban on citizens from certain primarily Muslim countries is not the best way to address the country’s challenges.
"Many people negatively affected by this policy are strong supporters of the US. They've done right,not wrong & don't deserve to be rejected." - Twitter
REUTERS/Bobby Yip/File Photo
Tim Cook, Apple CEO
"Apple would not exist without immigration, let alone thrive and innovate the way we do." - Memo to employees
(Photo credit JOSH EDELSON/AFP/Getty Images)
Jeff Bezos, CEO of Amazon
"This executive order is one we do not support.
"We're a nation of immigrants whose diverse backgrounds, ideas, and points of view have helped us build and invent as a nation for over 240 years.... It's a distinctive competitive advantage for our country—one we should not weaken." - Memo to employees
Reed Hastings, Netflix CEO
"Trump's actions are hurting Netflix employees around the world, and are so un-American it pains us all. Worse, these actions will make America less safe (through hatred and loss of allies) rather than more safe. A very sad week, and more to come with the lives of over 600,000 Dreamers here in a America under imminent threat. It is time to link arms together to protect American values of freedom and opportunity." - Facebook
Howard Schultz, Starbucks CEO
"There are more than 65 million citizens of the world recognized as refugees by the United Nations, and we are developing plans to hire 10,000 of them over five years in the 75 countries around the world where Starbucks does business. "
"Not allowing countries or refugees into America is not right and we must stand with those who are affected.
"Airbnb is providing free housing to refugees and anyone not allowed in the US. Stayed tuned for more, contact me if urgent need for housing." - Twitter
Muhtar Kent, Coca-Cola CEO
"Coca-Cola Co. is resolute in its commitment to diversity, fairness and inclusion, and we do not support this travel ban or any policy that is contrary to our core values and beliefs." -e-mailed statement
Brian Moynihan, Bank of America CEO
"As a global company, we depend upon the diverse sources of talent that our teammates represent.
"In view of this, we are closely monitoring the recent refugee- and immigration-related executive order in the United States, and subsequent developments." - Memo to employees
REUTERS/Robert Galbraith (UNITED STATES - Tags: SCIENCE TECHNOLOGY BUSINESS HEADSHOT)
Travis Kalanick, Uber CEO
"Drivers who are citizens of Iran, Iraq, Libya, Somalia, Sudan, Syria or Yemen and live in the U.S. but have left the country, will not be able to return for 90 days. This means they won't be able to earn money and support their families during this period." - Facebook
Dara Khosrowshahi, Expedia CEO
"I believe that with this Executive Order, our President has reverted to the short game. The U.S. may be ever so slightly less dangerous as a place to live, but it will certainly be seen as a smaller nation, one that is inward-looking versus forward thinking, reactionary versus visionary." - Memo to employees
2010. REUTERS/Lucas Jackson (UNITED STATES - Tags: BUSINESS TRAVEL)
Jeff Immelt, General Electric CEO
"These employees and customers are critical to our success and they are our friends and partners." - Memo to employees
Trip Advisor CEO Stephen Kaufer
"We need to do more, not less, to help refugees. Trumps action was wrong on humanitarian grounds, legal grounds, and won't make us 'safer.' " - Twitter
(Photo by Amy E. Price/Getty Images for SXSW)
Salesforce CEO Vala Afshar
Jeff Weiner, LinkedIn CEO
"40% of Fortune 500 founded by immigrants or their children. All ethnicities should have access to opportunity -- founding principle of U.S." - Twitter
Photographer: David Paul Morris/Bloomberg via Getty Images
Salesforce CEO Mark Benioff
"When we close our hearts & stop loving other people as ourselves (MK 12:31) we forget who we truly are---a light unto the nations. #noban" - Twitter
(Photo by Tim Mosenfelder/Getty Images)
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"Our belief is that the company generally obtains about 70-90% of its avocados from Mexico, all of its limes, the majority of its jalapenos, less than half of its tomatoes, and small amounts of other items (e.g., cilantro)," Kalinowski wrote in a note published Tuesday. "In other words, should a 20% tariff be enacted for goods imported from Mexico, Chipotle likely would bear the biggest brunt of this potential impact on food costs compared to the other companies we cover."
If a border tax is enacted, it's likely that restaurant chains would be forced to increase menu prices to offset the higher cost of goods — and protect profit margins — by passing it on to customers.
But Chipotle doesn't have much flexibility to pass on extra costs to customers when the company is still trying to recover from a months-long E. coli outbreak that sent its sales tumbling.
Revenue declined 14.8% to $1 billion in the third quarter and same-store sales, or sales at stores open at least a year, dropped 21.9%. Net income for the quarter was $7.8 million, a decrease from $144.9 million for the period last year. The company reports fourth quarter earnings on Thursday.
Chipotle declined to comment on how the proposed tax could affect the company, saying that at this point it's "purely speculative."
"There are a host of variables that can impact upon food costs (weather, supply and demand, and public policy decisions, among others)," Chipotle spokesman Chris Arnold said. "If any events impact our food costs in material ways, we'll make that information available in a timely fashion, but we're not going to speculate about what any of these events might mean."