Chicken Tax: What it Is, How it Got the Name

What Is the Chicken Tax?

The Chicken Tax is a 25% tariff on light trucks imported to the U.S. The United States imposed the tariff in 1964 in an executive order issued by President Lyndon Johnson as retaliation for European tariffs on American chicken imports. In the years since then, trade barriers have fallen, and the average U.S. tariff rate on industrial imports stands at 2% as of 2022, according to U.S. government figures. But the Chicken Tax still stands.

The original order slapped a 25% tariff on potato starch, dextrin, and brandy as well as light trucks. In the intervening decades, the other products were stripped out but the tariff on light truck imports remains. The Chicken Tax is also known as the Chicken Tariff.

Understanding the Chicken Tax

Industrial farming methods developed in the U.S. in the years following World War II led to a vast increase in the production of chicken, and production efficiencies led to lower prices. Once a treat reserved for a Sunday family dinner, chicken became a staple of the American diet. And there was plenty of surplus chicken for export to Europe. According to a 1962 article in Time magazine, chicken consumption rose 23% in West Germany in 1961.

A Farmers' Standoff

But Europe was still struggling to recover from World War II, and farmers in Europe complained that American farmers were cornering the chicken market and driving local producers out of business. By the end of 1961, France and Germany had placed tariffs and price controls on birds from the U.S. By the beginning of 1962, U.S. businesses began complaining they were losing sales. At the end of the year, they estimated they had lost 25% of their sales due to European intervention in the chicken market. European and U.S. diplomats tried without success through 1963 to reach a trade agreement on chicken.

About Cars and Chickens

Meanwhile, the American auto industry was suffering a trade crisis of its own. Imports of Volkswagen cars surged in the early '60s as Americans embraced the Beetle and its cousin, the Type 2 van. The situation was dire enough that U.S. automakers and the United Auto Workers (UAW) union brought the issue of German auto imports to the presidential bargaining table, according to a 1997 New York Times article.

President Johnson was trying to persuade Walter Reuther, president of the United Auto Workers, not to call a strike just before the 1964 election. The president also wanted union support for his civil rights agenda. He got what he wanted in return for including light trucks in the Chicken Tax. Volkswagen sales of trucks and vans in the U.S. plummeted.

The Chicken Tax Today

Lobbying by the auto industry has kept the tax alive all these years. That is arguably why American-made trucks still dominate truck sales in the U.S. Although, it must be noted that many of those and other vehicles are manufactured in Mexico or Canada, both of which may receive preferential tariff treatment if complying with specific requirements under the United States-Mexico and Canada Agreement (USMCA).