Trump, Mexico And Avocados

Calavo Growers, Inc. CVGW shares are down 10 percent so far in 2017 as President Donald Trump has ramped-up his rhetoric about building a border wall with Mexico and paying for the wall by imposing a 20 percent tariff on imported Mexican goods.

“By doing it that way we can do $10 billion a year and easily pay for the wall just through that mechanism alone,” White House press secretary Sean Spicer said of a proposed 20 percent tariff this week.

The U.S. gets the bulk of its avocado supply from Mexico, where Calavo has a large share of its operations. DA Davidson analyst Eric Gottlieb tells Benzinga he doesn’t believe a potential tariff on Mexican imports will have a significant impact on growing U.S. avocado demand.

“That said, given 80 percent of our product comes from Mexico and the growing demand, I think the administration would be wise to exclude the product from the full tariff,” Gottlieb says.

Gottlieb tells Benzinga that certain products will likely be subject to unique tariff provisions.

“The 20 percent tariff on all products from Mexico I believe will be modified to be for some products and not others, and avocados should be part of the latter group,” Gottlieb explains.

If Gottlieb is correct, the recent weakness in Calavo could end up an excellent buying opportunity.