By Dayanne Sousa and Ilena Peng
President Donald Trump’s tariffs on major cocoa-producing countries are giving European chocolate companies a competitive advantage over those in the US.
London cocoa futures for May delivery traded more than $500 a ton lower than the New York contract on Thursday. Tariffs could deal a blow to US chocolate makers, making the cost of supplies relatively more expensive than in other regions. Chocolatiers have already struggled as a supply shortage sent cocoa futures to record highs last December.
“It’s hugely problematic,” said Jonathan Parkman, head of agricultural sales at commodities broker Marex Group. The cost increase will likely be passed on to consumers, potentially hurting US chocolate demand and making the country’s chocolate exports less competitive, he said.
The arbitrage widened as May New York cocoa prices rallied as much as 5.8% intraday to the highest price since late February. The London contract for the same month, meanwhile, cooled as much as 4.9%.
New York futures have so far “ignored the potential impact the new US tariffs could have on consumption, possibly because it has already confronted the prospect of reduced demand,” analysts at ADM Investor Services wrote in a note. That’s as prices have dropped from last December’s records, in part because of weaker demand.
Read More: Trump’s Tariffs Send Deliberate Shock to Heart of Global Economy
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