OPINIO
Trade4go
Mar 27th, 2025
Original content
On February 1, 2025, the United States (US) announced a 25% tariff on agricultural imports from Mexico as part of its ‘America First’ strategy to reduce trade imbalances and encourage domestic production. The tariffs, set to take effect on April 2, 2025, were justified by the US President as a response to trade deficits, border security concerns, and perceived unfair trade practices. While the goal is to make imports more expensive and incentivize local production, the decision has sparked fears of rising food prices in the US and economic strain for Mexican farmers.
The tariffs also serve as a negotiating tool for broader issues like border security and drug trafficking. However, their implementation risks disrupting global trade dynamics, as retaliatory measures from other countries could further complicate supply chains.
The increased tariff on Mexican agricultural products, including avocados, is expected to disrupt the US-Mexico trade relationship significantly. Mexico supplies 80-90% of the avocados consumed in the US, with California and other countries like Peru and Colombia contributing only marginally. This heavy reliance on Mexican imports leaves the US market highly vulnerable to price inflation and supply shortages.
US avocado prices have already surged due to a combination of factors, including droughts in Mexico and reduced shipments. For example, prices peaked at USD 4.88/kg before Super Bowl LIX, reflecting the seasonal spike in demand. Price hike continued, and in W3 of Mar-25, reached a record high of USD 9.82/kg (Chicago) and 8.90/kg (Everett), soaring by 81.35% and 78.30% YoY respectively.
The additional tariffs are expected to inflate prices further, potentially doubling them in some cases. This trend highlights the structural limitations of the US avocado market, which cannot quickly pivot to alternative sources or scale up domestic production to meet demand.
Figure 1. Wholesale Prices of Avocados in the US
Source: Tridge
A 20% drop in avocado shipments from Mexico to the US was already observed in Jan-25, driven by high prices and reduced demand. The Association of Producers and Exporters of Avocados of Mexico (APEAM) reported that exports prior to the Super Bowl season fell to 110,000 metric tons (mt), down from 137,500 mt in the same period last year. The tariffs are likely to exacerbate this decline, forcing US importers to seek alternative suppliers.
However, alternative sources face significant challenges. While a growing exporter, Peru has seasonal production and primarily supplies Europe. Colombia, another emerging supplier, is constrained by slow farm and packhouse registration processes, limiting its ability to scale up exports quickly. Smaller producers like Chile and the Dominican Republic lack the production capacity to fill the gap, leaving the US market with few viable options.
Figure 2. Countries Competing with Mexico for Avocado Exports
Source: Tridge Eye
Mexico’s avocado industry relies heavily on the US market, with 80% of its exports destined for the US. In 2024, Mexico’s avocado export value reached a record USD 3.49 billion, underscoring the importance of this trade relationship. The tariffs, however, threaten to reduce competitiveness and revenue for Mexican growers and exporters.
To mitigate these risks, Mexican exporters are pursuing market diversification. Europe, Asia, and Canada are key targets, with Canada already ranking as the second-largest export market, with USD 284.36 million export value of fresh avocados and 103,783 mt volume in 2024. However, competition from other suppliers like Peru and logistical challenges in accessing distant markets could limit Mexico’s ability to fully offset the loss of US demand.
The US cannot meet its domestic avocado demand through local production alone. California, the largest domestic producer, accounts for only 12% of the market, and its production is seasonal. Mexico’s year-round supply fills this gap, especially during winter months when it provides 95% of US avocado consumption.
While the US could invest in expanding domestic production in states like California, Florida, and Texas, this is a long-term solution. Even with a projected 33.3% YoY increase in domestic production for the 2024/25 season, the total output of 200,000 mt remains a fraction of the 1.12 mmt Mexico supplied to the US in 2023. This underscores the structural dependency of the US on Mexican avocados, which cannot be easily replaced by alternative sources or domestic production.
The US-Mexico avocado trade is at a critical juncture. While the US remains heavily dependent on Mexican avocados, the tariffs could force importers to explore alternative sources, such as Peru, Colombia, or even domestic production in California and Florida, albeit with limitations. However, these sources face limitations in terms of production capacity, seasonality, and quality consistency, which could lead to supply shortages and higher prices for US consumers in the short term.
Similarly, Mexican exporters must diversify their markets to mitigate the economic impact of reduced US demand, their largest and most lucrative export destination. This would necessitate aggressive diversification into other markets, such as Europe, Asia, and the Middle East, potentially leading to further price pressure on global levels.
Both countries will need to adapt to these changes to maintain stability in the avocado market, as it stands now the proposed tariffs could trigger a realignment of the global avocado trade, with both opportunities and challenges for producers, exporters, and consumers. One of the solutions is more bilateral cooperation and further negotiations on tariff rules since the US and Mexico are highly dependent on each other regarding the avocado trade.
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