Trump's Tariff Mistake: How Hard Candy Prices Reveal a Bitter Lesson
Sugar tariffs, meant to protect American farmers, are leaving a bitter taste for U.S. candy manufacturers. As confectionery giants grapple with soaring costs and declining profits, they were compelled to shift production—and jobs—overseas. Examining the unexpected economic fallout from these tariffs shows how a protective policy intended to benefit sugar producers inadvertently harmed the broader U.S. economy. Learn why America's favorite treats became casualties of tariff-driven policies and the urgent lessons that policymakers must understand before it's too late.
HISTORYAGRICULTUREBUSINESSFEDERAL GOVERNMENTFINANCE
Dr. Shawn Granger
4/1/20252 min read
The Impact of U.S. Sugar Tariffs on Domestic Candy Manufacturers
The United States sugar tariff program, which aims to protect domestic sugar producers, has significantly impacted the confectionery industry by raising production costs, causing some manufacturers to move operations overseas, and affecting employment in the sector.
Overview of the U.S. Sugar Program
The federal sugar program utilizes a combination of price supports, domestic marketing allotments, and tariff-rate quotas (TRQs) to regulate the sugar supply and maintain prices above global market levels. Under this system, a limited quantity of sugar can be imported at a low tariff rate, while imports exceeding this quota face significantly higher tariffs. Historically, these measures have led to U.S. sugar prices being approximately double those of the global market (Beghin, 2022).
Effects on Candy Manufacturers
Elevated sugar prices have placed U.S. candy producers at a competitive disadvantage. Companies are compelled to pay significantly more for sugar than their international counterparts, which increases production costs. This cost disparity has driven some manufacturers to shift production to countries with lower sugar prices. For instance, Hershey Co. repurchased a factory outside Ottawa, Canada, that it had previously closed, while Blommer Chocolate Co. expanded in Ontario and closed an 85-year-old plant in Chicago. These moves are primarily attributed to high U.S. sugar prices resulting from protectionist policies (Peng, 2024).
The National Confectioners Association (NCA), representing over 500 confectionery companies, has highlighted the challenges posed by the U.S. sugar program. According to the NCA, American businesses are forced to operate at a competitive disadvantage, paying twice as much for sugar as their foreign competitors. This situation has prompted the NCA to advocate for changes to the sugar program to increase supply during periods of high demand (National Confectioners Association, 2017).
Economic and Employment Consequences
The financial burden of the sugar program extends beyond candy manufacturers. A study by the U.S. Department of Commerce found that for every job saved in the sugar-growing industry, approximately three jobs are lost in the confectionery industry due to higher sugar costs (U.S. Department of Commerce, 2006). This indicates that while the sugar program benefits domestic sugar producers, it may negatively impact employment in related industries.
Conclusion
While supporting domestic sugar producers, the U.S. sugar tariff program imposes significant challenges on candy manufacturers by increasing production costs and influencing operational decisions, including relocation. These dynamics underscore the complex interplay between agricultural policies and manufacturing industries, highlighting the need for balanced approaches that consider the broader economic implications.
References
Beghin, J. (2022). Recapping the Effects of the U.S. Sugar Program. American Enterprise Institute. Retrieved from https://www.aei.org/research-products/report/recapping-the-effects-of-the-us-sugar-program/
National Confectioners Association. (2017). How the Outdated and Outrageous U.S. Sugar Policy Impacts the Manufacturers That Make Your Favorite Valentine’s Day Treats. Retrieved from https://candyusa.com/news/how-the-outdated-and-outrageous-u-s-sugar-policy-impacts-the-manufacturers-that-make-your-favorite-valentines-day-treats/
Peng, I. (2024). US Sugar Tariffs Make Canada a More Attractive Place to Manufacture Candy. Bloomberg. Retrieved from https://www.bloomberg.com/news/articles/2024-06-08/us-sugar-tariffs-make-canada-more-attractive-place-to-manufacture-candy
U.S. Department of Commerce. (2006). Employment Changes in U.S. Food Manufacturing: The Impact of Sugar Prices. Retrieved from https://www.trade.gov/sites/default/files/2020-12/Employment%20Changes%20in%20U.S.%20Food%20Manufacturing_The%20Impact%20of%20Sugar%20Prices.pdf