Heat a large skillet over medium-high heat. Cook and stir beef, about half the sweet onion, and garlic powder in the hot skillet until completely browned, 5 to 7 minutes.

Mix tomato chunks, chili beans, tomato sauce, kidney beans, ketchup, and tomato paste in a large pot; bring to a boil and reduce heat to low. Stir the ground beef mixture and mushrooms into the tomato mixture; season with chili powder, sugar, salt, and black pepper. Cook chili at a simmer, stirring occasionally, until the flavors blend, about 45 minutes. Top individual servings with diced sweet onion to serve.