The 'Chicken Tax' and Its Impact on Foreign Automakers in the U.S.
Many people wonder if foreign automakers manufacture in the United States to avoid the 'Chicken Tax.' The answer is yes, but the 'Chicken Tax' is a unique historical tariff that has far-reaching implications beyond just the poultry industry. Let's delve into the origins of this 25% tariff and its ongoing impact on the automotive industry today.
The Origins of the 'Chicken Tax'
The 'Chicken Tax' is a 25% tariff on light trucks and vans imported to the United States. It was imposed in 1964 as a form of retaliation against European countries that had placed tariffs on U.S. chicken exports. The tariff was signed into law via an executive order by President Lyndon B. Johnson to gain support from labor unions and agricultural lobbies.
The Rise of Poultry and Industrial Farming in the U.S.
In the years following World War II, the U.S. saw a significant rise in industrial farming methods that led to a massive increase in chicken production and lower prices. By the early 1960s, chicken had become a staple of the American diet, and excess production was readily exported to Europe. According to a 1962 Time magazine article, chicken consumption in West Germany had risen by 23% in 1961.
The European Response: Tariffs and Price Controls
However, Europe was still in the recovery phase from World War II, and local farmers faced severe economic challenges. The introduction of U.S. chicken into the European market drove local producers out of business. By the end of 1961, France and Germany imposed tariffs and price controls on U.S. birds. This move led to a significant loss of sales for U.S. chicken producers, estimated at about 25% by the end of 1962.
A Trade Crisis: German Automakers and the U.S. Market
During this tumultuous period, the U.S. auto industry was also experiencing a crisis due to the increasing import of foreign vehicles, particularly Volkswagen cars and Type 2 vans. The situation was so dire that U.S. automakers and the United Auto Workers (UAW) union brought the issue of German auto imports to the presidential bargaining table.
President Lyndon B. Johnson sought to avoid a potential strike from the UAW and gain union support for his civil rights agenda. In exchange, the UAW and other U.S. automakers agreed to support the 'Chicken Tax' on imported light trucks and vans. This move significantly hurt the sales of Volkswagen trucks and vans in the U.S.
The Continuing Relevance of the 'Chicken Tax'
While trade barriers have gradually decreased, the 'Chicken Tax' remains a 25% tariff on light trucks and vans imported to the U.S. This tariff is one of the highest in the world and has a direct impact on foreign automakers that want to expand their operations in the U.S.
For foreign automakers, manufacturing in the U.S. allows them to avoid the 'Chicken Tax' and also provides the advantage of hiring U.S. residents to build their products. This strategy is likely to continue as long as the 'Chicken Tax' remains in place.
Conclusion
The 'Chicken Tax' has a long and complex history that spans several decades. It is a reminder of the complex nature of international trade and the impact of protective tariffs on global industries. For foreign automakers, understanding the 'Chicken Tax' is essential to making informed decisions about their manufacturing strategies in the U.S.
Keywords: Chicken Tax, foreign automakers, U.S. import tariffs