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.
- The Chicken Tax is a tariff of 25% on light truck imports.
- The Chicken Tax was originally imposed in 1963 in retaliation for European tariffs on American chicken.
- The average U.S. tariff rate on industrial imports is now 2%.
- In the 1960s, foreign-made vehicles increased in popularity at the expense of American-made vehicles.
- In response to pressure from U.S. automakers, President Johnson included light trucks in the Chicken Tax.
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.
The Chicken Tax has had a lasting impact on U.S. industry, for better and for worse.
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).
Are SUVs subject to the Chicken Tax?
Most SUVs are classified as light trucks and are therefore included in the Chicken Tax. SUVs that are classified as cars are not subject to the Chicken Tax.
Why is it called the Chicken Tax?
The Chicken Tax or Chicken Tariff received its name after several European nations imposed tariffs and other restrictions on imported American birds, particularly chicken. American farmers lost significant income, and their cornered market position dwindled. In response, President Johnson re-engaged by imposing tariffs on certain European imports, such as light trucks, brandy, and potato starches. Today, the Chicken Tax only applies to light trucks, but the name remains.
What is the chicken trade war?
Post World War II, technological advances allowed U.S. farmers to increase chicken production. As a result, they began to seize a large share of the global chicken market. Feeling pressure from European farmers, many of whom went out of business, several European countries imposed tariffs and trade controls on American-imported chicken and other birds. Simultaneously, the U.S. auto industry was experiencing similar pains due to lost sales to foreign-based auto manufacturers. In response, President Johnson, seeking to improve U.S. auto sales and driven by retaliation, imposed tariffs on imported trucks, potato products, and certain spirits.