What is a Chicken Tax
The Chicken Tax, also known as the Chicken Tariff, is a 25% tariff on imported light trucks. The tariff was imposed in 1963 by President Lyndon Johnson's executive order under his authority of the General Agreement on Tariffs and Trade (GATT). The duty originally put a 25% imposition on potato starch, dextrin, and brandy, as well as light trucks. However, in the intervening decades, other provisions were stripped out, and only the tariff on light trucks remains.
BREAKING DOWN Chicken Tax
Why does the Chicken Tax refer to tariffs on light trucks imported to the U.S.? In the late 1950s and early 1960s, Europe was still recovering from World War II. The chicken was expensive, particularly in Germany. In the United States, on the other hand, industrial farming methods, developed after the war, led to a vast increase in the amount of chicken produced, which reduced the price of chicken considerably. With this lowering of cost, chicken which was once considered a delicacy to be eaten only at Sunday dinner became a staple of the American diet. Because of the surplus of chicken, the export of chicken to Europe grew.
According to an article in Time magazine from 1962, chicken consumption in 1961 rose 23% in West Germany. European countries complained that U.S. farmers were cornering the chicken market thereby driving local producers out of business. By the end of the year, European nations, including France and Germany, began to place tariffs and price controls on birds from the U.S. At the beginning of 1962, U.S. businesses began complaining they were losing sales. By the end of the year, they estimated a 25% loss in sales due to European intervention in the chicken market. Diplomats from Europe and the U.S. tried to reach a trade agreement on chicken through 1963.
Automobiles and the Chicken Tax
Meanwhile, the auto industry in the U.S. was suffering a similar trade crisis. Imports of Volkswagen cars surged in the early '60s as American consumers fell in love with the "Bug," and its cousin, the Type 2 van. As reported in an in-depth article by The New York Times, and according to tapes recorded in the Johnson White House, which were released in the 1990s, the situation was dire enough that U.S. automakers and the United Auto Workers were willing to make German auto imports a bargaining chip. According to The New York Times, President Johnson was trying to persuade Walter Reuther, the U.A.W.'s president, not to call a strike just before the 1964 election and to support the President's civil rights agenda. The solution was to include light trucks in the Chicken Tax.
Although other items saw the removal of the Chicken Tax, determined lobbying by the auto industry over the last 50 years has kept the law alive. That is why American-made trucks still dominate truck sales in the U.S.