Trump's Tariffs Hurt U.S. Chocolate Makers, Help Canadian and Mexican Rivals

 

President Trump's tariffs were designed to support American manufacturing, but in the chocolate industry, they’re doing the opposite. U.S. chocolate makers now face tariffs of 10% to 25% on cocoa imports set to rise to 35% in August raising their production costs significantly. Since cocoa is a tropical crop and cannot be grown in the U.S., domestic chocolate producers have no choice but to import it.

Meanwhile, under the USMCA trade agreement, Canada and Mexico are allowed to export chocolate to the U.S. tariff-free, even if the cocoa is sourced elsewhere. Canada also does not tax raw or semi-processed cocoa imports, and Mexico grows some of its own beans. This gives foreign factories a clear price advantage. Major U.S. producer Hershey estimates these tariffs could cost them $100 million over just two quarters. Smaller manufacturers like Taza Chocolate in Massachusetts are also struggling, with some containers of cocoa now costing over $30,000 in tariffs alone.

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Some companies explored moving manufacturing abroad but found it too risky. Now, many are simply hoping the policy will change. Customs data shows Canadian chocolate exports to the U.S. have already increased 10% this year, indicating they’re capitalizing on the shift in trade dynamics.

The new tariff policy has coincided with record-high cocoa prices, driven by poor weather and disease in West Africa, which grows most of the world’s cocoa. This is making chocolate even more expensive to produce. Cocoa makes up 30% to 50% of the cost of a chocolate bar, and many manufacturers have already raised prices to cope. Hershey rolled out major price hikes across products like Reese’s, and smaller firms like Taza have increased retail prices by $1 per bar.

While some large companies, like Mars, are sticking with U.S. manufacturing, others are quietly relying more on plants in Canada and Mexico to reduce costs. Canadian and Mexican contract chocolate makers are benefiting, as they produce the base chocolate that is then shipped to the U.S. for finishing and sale.

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The shift is creating new business opportunities in Mexico, where manufacturers report increasing interest from American chocolate companies looking to outsource production. Canadian firms are also experiencing growth, as they gain from their tariff-free cocoa imports and access to the U.S. market under USMCA.

The U.S. remains the world’s largest chocolate consumer, with a market valued at $25–30 billion. Imports from Canada and Mexico make up over 12% of that. As the trade environment remains uncertain and tariffs potentially rise even further, U.S. chocolate makers are left at a disadvantage and calling for government intervention or exemptions for cocoa.