What is the Chicken Tax?

The chicken tax refers to a 25% tariff or tax that the United States government imposed in 1964 on light trucks imported into the country This tax was originally imposed by President Lyndon B Johnson as a retaliatory measure against tariffs that countries in Europe had introduced on imported American chicken,

While the tariffs on chicken exports have long since been removed the 25% tax on imported light trucks still remains in effect today. This makes the chicken tax one of the longest-lasting trade policies implemented by the U.S. government.

A Brief History of the Chicken Tax

To understand the origins of the chicken tax, we need to go back to the early 1960s. At that time the U.S. chicken industry had grown rapidly thanks to advancements in industrial farming techniques and was exporting large quantities of chicken to countries in Europe.

However, European farmers were unable to compete with the cheap imported American chicken. So France and West Germany implemented tariffs and other restrictions on imports of U.S. chicken with the aim of protecting their domestic poultry industries.

The U.S. government saw this as unfair trade practices. In retaliation, President Johnson imposed tariffs on various imports from Europe including brandy, potato starch, dextrin and light trucks. The tariffs on trucks were targeted specifically at Volkswagen, which was exporting increasing numbers of vehicles to America at the time.

Over the years, the tariffs on brandy, potato starch and dextrin were removed. But the 25% tax on light truck imports remains in place today and is now referred to as the “chicken tax”.

What Vehicles Are Affected by the Chicken Tax?

The chicken tax applies specifically to light trucks, which includes pickup trucks, vans, SUVs, and commercial vehicles like delivery vans and trucks. So any imported vehicle that falls into these categories is subject to the 25% tariff when entering the U.S.

This gives American automakers an advantage, as their domestically produced light trucks are exempt from the tax. But it makes imported trucks more expensive for American consumers and limits the variety of light trucks available in the U.S. market.

Some examples of vehicles that have been impacted by the chicken tax over the years:

• Volkswagen Type 2 vans and pickups
• Small pickup trucks from Japanese automakers like Toyota, Nissan, and Mazda
• Mercedes-Benz and Dodge Sprinter vans
• Ford Transit Connect vans

So if you’re looking to import a classic light truck or commercial vehicle into the U.S., be prepared to pay the 25% chicken tax on top of the vehicle price and shipping costs.

How Automakers Try to Get Around the Chicken Tax

Because the chicken tax makes imported light trucks uncompetitive in the U.S. market, foreign automakers have tried various methods over the years to get around it.

One approach is to ship partially assembled “chicken tax kits” that are then completed in the U.S. This allows them to avoid the tax since the vehicles are technically manufactured domestically. The Chevrolet LUV pickup was imported to the U.S. using this method in the 1970s and 80s.

Another tactic is to import light trucks as passenger vehicles, then convert them to trucks after they clear customs. Ford famously did this for years with the Transit Connect van, shipping it from Turkey with rear seats and windows in place before stripping out the extra parts stateside.

Automakers have also set up production facilities in the U.S. and countries like Mexico and Canada that have free trade agreements with the U.S. This allows them to avoid the chicken tax while still getting their trucks to American buyers.

The Chicken Tax in the Age of Free Trade

In recent decades, the U.S. has entered into free trade agreements like NAFTA and CAFTA that eliminate tariffs between participating countries. This has raised questions about whether the antiquated chicken tax still has a place in modern trade policy.

Critics argue the tax is an outdated protectionist measure that inhibits free trade. It deprives consumers of choice and keeps prices artificially high. But U.S. automakers and labor unions defend the tariff, saying it helps maintain auto industry jobs in the face of foreign competition.

There have been efforts by policymakers over the years to try to repeal the chicken tax, but they’ve all been unsuccessful so far. The tariff has proven very difficult to dislodge, largely because of the determined lobbying efforts in Washington by the auto industry.

So despite the era of global free trade we now live in, this relic of 1960s trade wars lives on, continuing to shape the U.S. light truck market over half a century later. It’s a testament to just how enduring trade policies can be, even when the context that created them has long since changed.

The Chicken Tax’s Lasting Impact

The chicken tax may seem like an archaic and absurd trade policy born out of a petty international dispute over poultry exports. But in truth it has had wide-ranging and long-lasting impacts on the U.S. automotive industry and car culture overall.

By shielding domestic manufacturers from foreign competition in the lucrative light truck market, the tariff allowed the U.S. auto industry to thrive and helped Detroit’s Big Three automakers achieve dominance.

But at the same time, it deprived American consumers of many imported truck models, limited innovation, and encouraged a reliance on gas-guzzling light trucks over more efficient passenger cars. This contributed to the issues Detroit faced in the 1970s and 80s when fuel prices rose and demand shifted towards smaller, imported cars.

The chicken tax has also influenced the strategies and production footprint of foreign automakers looking to sell vehicles in the U.S. It’s one reason why transplant facilities were established here by the likes of Toyota, Honda, BMW and Mercedes-Benz.

So this obscure 25% import tax hatched from a poultry trade spat has left an unexpected legacy that continues to impact the U.S. auto industry and car enthusiasts today. It just goes to show you never know when a seemingly minor trade policy might end up having consequences lasting decades into the future.