Chicken Tax Definition

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Chicken Tax Definition

What Is the Chicken Tax?

The Chicken Tax imposes a 25% levy on light vehicles imported into the United States. In 1964, President Lyndon Johnson signed an executive order imposing the duty in response for European levies on American chicken imports. Trade barriers have subsequently reduced, with the average US tariff rate on industrial imports being at 2% as of 2022, according to US official estimates. However, the Chicken Tax remains in effect.

The first decree imposed a 25% duty on potato starch, dextrin, brandy, and light vehicles. Other items have been phased out throughout the years, but the duty on light vehicle imports persists. The Chicken Tariff is another name for the Chicken Tax.

Key Takeaways

  • The Chicken Tax is a 25% duty on imports of light trucks.
  • The Chicken Tax was first implemented in 1963 in response to European duties on American chicken.
  • The average tariff rate on industrial imports in the United States is presently 2%.
  • Foreign-made automobiles gained popularity at the cost of American-made vehicles in the 1960s.
  • President Johnson included light vehicles under the Chicken Tax in response to lobbying from American manufacturers.

Understanding the Chicken Tax

Industrial farming techniques established in the United States in the years after World War II resulted in a massive rise in chicken output, and production efficiency resulted in cheaper pricing. Chicken, which was formerly designated for a Sunday family supper, has become a mainstay of the American diet. There was also plenty of excess chicken for export to Europe. According to a 1962 Time magazine story, chicken consumption increased 23% in West Germany in 1961.

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A Farmers’ Standoff

However, Europe was still recovering from World War II, and European farmers claimed that American farmers were monopolizing the chicken market and putting local producers out of business. By the end of 1961, France and Germany had imposed tariffs and price limits on American birds. By the beginning of 1962, companies in the United States were complaining about a drop in sales. At the end of the year, they calculated that European interference in the chicken market had cost them 25% of their sales. Throughout 1963, European and American officials failed to achieve an agreement on chicken commerce.

About Cars and Chickens

Meanwhile, the American car sector was facing its own trade crisis. Volkswagen imports skyrocketed in the early 1960s as Americans welcomed the Beetle and its cousin, the Type 2 van. According to a 1997 New York Times story, the situation was serious enough that American manufacturers and the United Vehicle Workers (UAW) union pushed the subject of German auto imports to the presidential negotiation table.

The Chicken Tax has had a long-term influence on American business, for better or ill.

President Johnson was attempting to convince United Auto Workers President Walter Reuther not to declare a strike right before the 1964 election. In addition, the president sought union backing for his civil rights program. Under exchange for putting light vehicles in the Chicken Tax, he got what he wanted. Volkswagen’s truck and van sales in the United States have fallen.

The Chicken Tax Today

The car industry’s lobbying has kept the tax alive all these years. That is perhaps why American-made vehicles continue to dominate truck sales in the United States. However, it should be noted that many of those and other automobiles are made in Mexico or Canada, both of which may obtain preferential tariff treatment provided particular standards under the US-Mexico-Canada Agreement are met (USMCA).

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Are SUVs subject to the Chicken Tax?

The Chicken Tax applies to most SUVs since they are considered as light trucks. SUVs categorized as automobiles are exempt from the Chicken Tax.

Why is it called the Chicken Tax?

After various European countries put tariffs and other limitations on imported American birds, mainly chicken, the Chicken Tax or Chicken Tariff was named. Farmers in the United States lost enormous revenue, and their monopolistic market position weakened. President Johnson responded by re-engaging by placing duties on select European goods such as light vehicles, whiskey, and potato starches. The Chicken Tax no longer applies to light vehicles, but the moniker lives on.

What is the chicken trade war?

Following WWII, technical breakthroughs enabled American farmers to boost chicken production. As a consequence, they started to capture a sizable portion of the worldwide chicken industry. In response to pressure from European farmers, many of whom went out of business, various European governments implemented taxes and trade restrictions on American-imported chicken and other poultry. Simultaneously, the US car industry was suffering from comparable difficulties as a result of losing sales to foreign-based automakers. President Johnson retaliated by imposing duties on imported trucks, potato goods, and some alcohol in order to boost domestic vehicle sales.

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