American Trucks Rule Thanks to the Chicken Tax

As President Trump sets his sights on trade agreements, here's an interesting look at how they work.

Chicken Tax
Getty Images/GM

What's the Chicken Tax?

I'm glad you asked.

NPR's Sonari Glinton tells us all about it in this re-run of the podcast Planet Money. You'll enjoy listening to it (link below), but here's what's going on.

US Dominates Truck Sales

Today, the US dominates production and sales of trucks. No competition. And the reason goes all the way back to a trade dispute in the 1960s between the United States and Germany. A dispute over frozen chicken parts.

German Chicken Farmers Demand Tariff

In the 1960s the post-war German economy is booming and the Germans are going nuts for chicken. They love it. But there's not much domestic German chicken over there and the prices are high. But guess what, we have tons of chicken that we can freeze and ship from America over to the Germans for cheap -- and we do. Next thing you know, the German farmers are freaking out about all this cheap American chicken, and boom. Germany puts a big 25% tax on incoming chicken.

US Retaliates With a Tariff on Imported Trucks

Meanwhile, in this era of free trade, Americans are going nuts for Volkswagens. They're everywhere in 1960. And the US is put off by this tax on the chicken (especially after we spent all that money rebuilding Germany), so they decide to tax some German things. They take aim at Volkswagen trucks and in 1963 LBJ signs a 25% tariff on imported commercial vehicles. Pickups, commercial vans, all trucks. From all countries. The Chicken Tax.

Truck Tariff Remains to This Day

It changed the truck industry profoundly in a way that persists today: American trucks rule in the USA. Nobody else comes close. That's because, to this day, anyone outside of the USA has to pay a 25% Chicken Tax to bring a truck over here.

On the podcast, they explain it all. Featured on the podcast is Auto-industry veteran Bob Lutz, Ford CEO Mark Fields and Fiat-Chrysler CEO Sergio Marchionne.

Listen here