Tariffs Backfire, Giving Mexican Chocolate Brands a Boost

Thanks to backfired US tariffs, Mexican chocolate producers are gaining ground against their US competitors. The same goes for brands north of the US border, in Canada.

President Trump’s trade tariffs were designed to boost American manufacturing. But in the chocolate industry, they’re creating a different outcome entirely. The reason is simple economics. While American factories now pay tariffs of 10 to 25 percent on imported cocoa, their neighbors can still export finished chocolate to the US tariff-free under the United States-Mexico-Canada Agreement (USMCA).

The tariff rates could jump to 35 percent on August 1, making the advantage even more pronounced. According to customs data compiled by Trade Data Monitor, Canada’s chocolate exports to the US grew 10 percent by volume in the five months ending in May. That’s a clear sign that manufacturers are seizing the opportunity.

The US chocolate market is worth $25 to 30 billion annually, making it the world’s largest. Canada supplies about 10 percent of that total, while Mexico accounts for 2.5 percent. But those percentages could shift as the tariff situation continues.

“The sentiment among companies and entrepreneurs, as well as requests from US chocolate companies to manufacture in Mexico, is real and has been increasing,” said Paolo Quadrini, director general of Mexican chocolate and candy association Aschoco Confimex.

The USMCA Edge

Here’s where things get interesting for Mexican producers. Under USMCA, which Trump’s own administration negotiated, Mexico and Canada can export chocolate to the US without tariffs. It doesn’t matter where they sourced their cocoa beans.

Mexico has an additional advantage. The country grows its own cacao beans, primarily in Tabasco and Chiapas states. That means Mexican chocolate makers can avoid import costs entirely for their raw materials.

The Yucatán Peninsula, while not a major cacao producer, hosts successful artisan chocolate operations like Ki’Xocolatl in Ticul, which won international recognition for producing some of the world’s finest chocolate using Mexican beans.

Canada imports raw and semi-processed cocoa duty-free, giving its manufacturers another cost advantage over US competitors who now face hefty tariffs on the same materials.

Real Costs, Real Impact

The tariff impact isn’t theoretical. Hershey, America’s top chocolate maker, estimates it will face $100 million in tariff costs during the third and fourth quarters if current rates remain.

Smaller companies feel the pinch even more acutely. Taza Chocolate in Somerville, Massachusetts, paid $24,124 in duties on a single container of cocoa from Haiti in May. The company faces another customs bill exceeding $30,000 to release its next container from the Dominican Republic.

Taza has already raised wholesale prices by 10 percent since last year. Its chocolate bars now cost $6.99 on the company website, up from $5.99 previously.

Contract Chocolate Boom

The companies benefiting most are contract chocolate makers – firms that produce raw chocolate for US factories to finish with additional ingredients and sell as American chocolate.

Barry Callebaut, a major multinational contractor, has nearly half its North American factories in Canada and Mexico. CEO Peter Feld noted during a July conference call that the company can “navigate this environment in the right way” because of its cross-border operations.

Companies like Barry Callebaut and regional contract manufacturers are perfectly positioned. They can source cocoa without tariffs, process it in Mexico or Canada, then ship finished products to the US market duty-free under USMCA.

Mexico’s Chocolate Heritage

Mexico produces about 29,000 metric tons of cacao annually, according to government data. That’s less than 0.5 percent of global production, but it’s enough to supply a growing domestic chocolate industry and expanding exports.

The country’s chocolate heritage runs deep. Ancient Maya and Aztecs developed the first chocolate beverages centuries before Europeans arrived. Today, artisan chocolate makers across Mexico are reviving traditional techniques while embracing modern markets.

Mexican cacao comes primarily from two states. Tabasco produces about 17,800 metric tons annually, while Chiapas contributes nearly 11,000 metric tons. These regions grow the Trinitario and Criollo varieties prized by premium chocolate makers worldwide.

Trade War Unintended Consequences

The chocolate situation illustrates how trade policies can produce unexpected results. Trump’s tariffs aimed to encourage domestic production by making imports more expensive. Instead, they’re shifting chocolate manufacturing to neighboring countries that can still access the US market without tariffs.

A government official said the White House continues monitoring trade trends and industry feedback to deliver on Trump’s economic agenda. But for now, the chocolate industry shows how complex global supply chains can route around tariff barriers.

Mars, the company behind M&Ms, said it’s investing $2 billion in US manufacturing, including chocolate production. The company makes 94 percent of its US products locally and hasn’t changed its sourcing structure in response to tariffs.

But other companies are adapting differently. The combination of higher cocoa costs and tariff-free alternatives from Mexico and Canada is reshaping where chocolate gets made in North America.

For Mexican chocolate makers, that shift represents a sweet opportunity in an increasingly bitter trade environment.