With Trump's recent re-election, the chocolate industry is on edge. During the campaign, one of his key promises was to impose tariffs of 10-20% on all imports, with a 60% tariff specifically on products from China. While this resonated with many voters, it also raised concerns about potential negative impacts on consumers and industry stakeholders.
For starters, Trump's tariff pledges are expected to disrupt supply chains and raise the price of chocolate and related products. Cocoa, the raw material for chocolate, is mainly imported from West African countries such as Ghana and Ivory Coast, which are highly dependent on exports. Higher tariffs could hurt their economies. If the U.S. were to impose high tariffs, these countries might stop exporting to the U.S. because it would harm their economies. Furthermore, since most of the U.S. chocolate industry relies on imports for intermediary goods such as machinery and packaging, higher tariffs would likely result in higher production costs, which would then be passed on to consumers. Thus, the irony is that a campaign promise intended to address inflation and high food prices could end up contributing to inflation and higher consumer prices.
American consumers are already struggling with high grocery prices. If tariffs lead to another increase in consumer prices, it could add to their economic burden, which is expected to be around 25% higher than pre-pandemic levels in 2024. According to an analysis by the Peterson Institute for International Economics, the imposition of tariffs could cost the typical household an additional $2,600 per year, creating an imbalance in household budgets. Retailers like Walmart have also noted that they may be forced to raise prices on essentials once the tariffs take effect, which could further strain household budgets.
If the U.S. introduces high tariffs, the global cocoa supply chain is likely to change. Major cocoa exporters, such as Ghana and Ivory Coast, will no longer find the U.S. market attractive, regardless of its size, because high tariffs will make exporting cocoa less profitable. They will prioritize trade with the European Union (EU), which has more favorable tariffs and more secure supply routes. This could result in a reduction in U.S. cocoa supplies, creating a supply bottleneck.
In addition, retaliatory tariffs are another issue to consider. If history is any indication, in 2018, the U.S. President imposed high tariffs on China, and China retaliated with high tariffs on U.S. soybean imports. This precedent suggests that trade tensions could escalate again, potentially affecting the entire food industry, not just chocolate. China and the U.S. are two of the largest trading markets in the world, so if they begin applying high tariffs in retaliation, it won’t just be bad for chocolate but for trade deals in general. Retaliatory tariffs from a trading partner can disrupt exports and make a product brand less competitive globally. The U.S. is already struggling with high grocery prices, so if exports are disrupted, U.S. chocolatiers will have an even harder time.
As a result, U.S. chocolate manufacturers and retailers should take steps to address this issue. For starters, they should diversify their sourcing options. Each time the U.S. announces an increase in tariffs, the industry faces a crisis that will need to be resolved in the long run. To minimize the impact of national policies, they should diversify their sourcing options as much as possible. Similarly, U.S. firms need to reduce their reliance on imports of intermediary goods, which will require investing time and capital to develop their own capacity to produce intermediary goods of sufficient quality domestically. Finally, governments need to help stabilize consumer prices for chocolate. They should work with policymakers to advocate for the elimination or reduction of tariffs on key agricultural imports, such as cocoa, and continue to communicate to consumers that high tariffs will ultimately lead to higher prices, creating a vicious cycle.
President Trump has been elected, so what does the future hold for the chocolate industry? His campaign promise to 'make groceries more affordable' appealed to voters, but high tariffs will ultimately lead to higher prices. The negative cascading effect, from supply chain disruptions to production costs and consumer prices, will likely cast a shadow over the entire food industry, including the U.S. chocolate industry. In the coming months, as the new administration's policies take shape, we'll have a clearer idea of what to expect. Rather than waiting for the outcome, stakeholders in the chocolate industry should start strategizing to respond to any changes, ensuring they can continue delivering value to consumers in these uncertain economic times. For more insights into how the U.S. chocolate market will change, check out Trump’s Tariff Policies Cast Uncertainty Over US Chocolate Industry!
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