Consider a humble bowl of guacamole.
Before it reaches the table at your favorite San Francisco restaurant, its journey begins in a balmy field in Michoacán, Mexico.
Here, laborers pluck avocados by hand, sending them to be packed, shipped, and refrigerated by scores of middlemen before ending in a thick dollop on your tortilla chip.
It is a mercurial supply chain prone to wild price fluctuations based on climate patterns and local market conditions. But a new geopolitical element is making matters even more difficult.
After a month-long pause, President Donald Trump is enacting a 25% fee on all Mexican products as part of a series of tariffs that include 25% and 10% levies on Canadian and Chinese goods, respectively.
Mexican restaurants and bars — which make up a significant part of San Francisco’s culinary scene — are awaiting the impacts with anxiety and dread.
“Almost every ingredient to a certain extent comes out of Mexico,” said Phil Havlicek, general manager of Celia’s by the Beach in the Sunset. “When I heard about the tariffs, it made the hairs on the back of my neck stand up.”
A side order of guacamole that sells for $7 at Celia’s costs the restaurant $6.44 to produce:
A 25% tariff on Mexican goods, if passed on wholly to consumers, would mean the guac would cost the restaurant $7.33 — obliterating its razor-thin profit margin and forcing it to raise prices.
“Most people are pretty OK with $1 to $2 extra,” Havlicek said. “But it becomes a pressure point for us. Some people can be nasty about it. They’ll chew you out. You’d be amazed at the things people get angry about.”
Havlicek has searched for domestic alternatives to Mexican produce, but his options are limited; California avocados won’t be in season until the spring.
The tariffs will likely “obliterate our margins,” Havlicek said.
Vesta Foodservice, a Southern California produce distributor with a heavy San Francisco presence, sent a memo to clients Friday about the impact of the tariffs. It said that there are no domestic alternatives for avocados, limes, and winter vegetables until April, meaning prices will increase in line with the tariffs.
“Price increases are the only mitigation strategy,” the notice reads.
For many bar managers, though, there are no domestic options to turn to, even later in the year. Any liquor that calls itself “tequila” must come from Mexico, because the country’s government owns the rights to the name.
Julio Bermejo, bar manager of Tommy’s Mexican Restaurant in the Richmond, said he’ll be forced to pass on price hikes to customers.
“We’re still nowhere near normal to where we were before the pandemic,” Bermejo said. “We have no wiggle room to eat price increases.”
‘Making liquor more expensive’
A house margarita at Tommy’s includes 2 ounces of Lunazul Reposado tequila, one ounce of agave nectar, and one ounce of fresh lime juice. All those ingredients come from Mexico.
Speaking to The Standard a month before the tariffs were set to go into effect, Bermejo said he felt powerless to protect his business.
“Prior to the pandemic, I would’ve stockpiled tequila,” he said. “Now, I can’t afford it.”
Brian Peck, director of Transnational Law and Business Center at the University of Southern California, said the brunt of the price increases may not be felt by consumers. “More often than not, there’s usually some give and take,” he said.
Importers can absorb price increases so they aren’t passed on to consumers, and exporters can take the loss so they don’t lose market share, Peck said. Depending on the circumstances, consumers could feel anything from “not that big of an impact” to the full force of the 25% tariff.
But restaurants and grocery stores, which usually operate on thin margins, will likely feel the worst of it, Peck said.
“Food prices tend to be much more sensitive and reactive to any sort of increase in costs and in the line of distribution,” he said.
A San Francisco-based executive at one of the country’s largest liquor distributors said most consumers likely won’t see price hikes on imported spirits until April or May, when large distributors will run out of inventory of popular brands, he said. He asked to remain anonymous because he was not authorized to speak to the press.
However, the impact will come nearly immediately for smaller brands and producers with inventory less readily available.
His customers, which include restaurants, bars, and beverage retailers like BevMo, started to stockpile liquor before the tariffs hit.
“They’re trying to buy as much as they can,” he said. “They’re eventually going to have to raise prices. Labor is expensive, rent is expensive, and now we’re making liquor more expensive.”
A typical bar using well tequila would see its per-ounce cost for a standard margarita nearly double under the tariffs, the executive said. That increase is quintupled for the customer ordering the drink, meaning a margarita at your local dive could cost upward of $10 — and even more at a fancier spot.
Every step of the supply chain will adjust its prices upward in line with the tariffs, meaning higher costs from importers, distributors, and retailers — all resulting in sticker shock on a night out.
“Look, it is a tax on the consumer,” the executive said. “We have to pay income taxes, sales taxes, and now this additional tax. I think it’s double taxation, and we should protest.”