U.S. President Donald Trump’s trade tariffs, aimed at reviving domestic manufacturing, are instead squeezing American chocolate producers, raising costs and handing a competitive advantage to Canadian and Mexican companies that can export chocolate to the U.S. tariff-free.
Under the United States-Mexico-Canada Agreement (USMCA), both Canada and Mexico are permitted to export chocolate to the U.S. without facing duties, regardless of where they source their cocoa, an essential ingredient that doesn’t grow in the U.S. Meanwhile, U.S. chocolate manufacturers are now facing tariffs of between 10% and 25% on imported cocoa, with rates expected to rise to 35% by August 1.
While Canada imposes no tariffs on raw or semi-processed cocoa, and Mexico cultivates its own beans, U.S. companies must absorb the increased costs. According to customs data compiled by Trade Data Monitor for Reuters, chocolate exports from Canada to the U.S. grew by 10% in the first five months of 2025, indicating Canadian producers are seizing the moment.
Leading U.S. manufacturer Hershey, which operates plants in the U.S., Canada, and Mexico, estimates it could incur $100 million in additional tariff-related costs in the latter half of the year. Although the company has introduced double-digit price hikes across its product range, it says these are unrelated to the tariffs. However, with cocoa now accounting for up to half the cost of a chocolate bar and global prices tripling in the past year due to crop failures in West Africa, the added duties are piling pressure on U.S. firms.
Small businesses are also feeling the pinch. Taza Chocolate, a Massachusetts-based craft chocolatier, recently paid over $24,000 in duties for a single shipment of cocoa from Haiti and anticipates a $30,000 customs bill for another from the Dominican Republic. CEO Alex Whitmore said the tariffs eliminate the company’s profit margins. Though he considered moving operations to Canada to take advantage of USMCA terms, he ultimately ruled it out due to high setup costs and market uncertainty.
“We’re just hunkering down and hoping this will pass,” Whitmore said. “A lot of us business owners are kind of frozen.”
The changing trade dynamics have sparked interest among U.S. firms in outsourcing production. According to Paolo Quadrini, director general of Mexican chocolate association Aschoco Confimex, more American chocolate makers are now exploring manufacturing partnerships in Mexico. Multinational firms like Barry Callebaut, which has significant production facilities in both Canada and Mexico, are also well-positioned to navigate the shifting landscape.
Mars, the maker of M&Ms, has not altered its sourcing strategy and continues to produce 94% of its U.S. goods domestically, despite announcing a $2 billion investment in U.S. manufacturing. Lindt said it would reassess sourcing decisions after August 1.
The U.S. chocolate market, valued at between $25 billion and $30 billion annually, remains the largest in the world. Imports from Canada account for about 10% of that market, with Mexico contributing around 2.5%.
Tareq Hadhad, CEO of Canada-based Peace by Chocolate, said Canadian contract manufacturers are seeing clear benefits. “It’s an advantage for them,” he noted.
As tariffs bite deeper, U.S. chocolate makers are pressing the government for exemptions—but for now, they remain in a bitter position in a globally sweet industry.
Written By Rodney Mbua
