This podcast explores the impact of the 'Chicken Tax' on the American auto industry, discussing trade disputes, decreased competition, and strategies used by foreign car manufacturers to bypass the tariff. It also highlights how the chicken tax can be used as a bargaining chip in trade negotiations.
The chicken tax was implemented as a retaliatory measure to protect the American auto industry and maintain a level playing field for American trucks in the global market.
The chicken tax continues to exist primarily as a bargaining tool in trade negotiations, enabling the United States to negotiate concessions in other industries.
Deep dives
The Chicken Tax: How Frozen Chicken Parts Led to the Dominance of American Trucks
After World War II, Germany imported frozen American chicken, leading to a trade dispute and the imposition of a 50% tax on American chicken by the German government. In retaliation, the United States implemented the "chicken tax," a 25% tariff on primarily commercial goods carrying vehicles, including pickup trucks. This tax effectively made foreign trucks too expensive to compete in the American market, allowing American trucks to dominate the industry. The chicken tax has stayed in place for over 50 years, even though American trucks are now so good that it would take a long time for the rest of the world to catch up.
The Consequences and Benefits of the Chicken Tax
The chicken tax continues to exist because it serves as a bargaining chip for the United States in trade negotiations. While American car manufacturers may not necessarily need the tariff, they benefit from its existence, as it maintains a level playing field for their trucks in the global market. Additionally, the chicken tax may be used to negotiate concessions in other industries, as exemplified by attempts to trade the removal of the tax on trucks with Japan in exchange for reduced tariffs on rice imports. Thus, the chicken tax functions as a tool for trade negotiators rather than being essential for the American car industry.
The Unlikelihood of Removing the Chicken Tax
Despite the potential lack of necessity for the chicken tax, it has remained firmly in place due to its usefulness as a bargaining chip in trade negotiations. Removing the tax would require a comprehensive trade deal where the benefits from lifting the chicken tax would outweigh the concessions made in other industries. It is worth noting that the United States, having withdrawn from the TPP, may have diminished opportunities to use the chicken tax as a negotiating tool. However, the tax has had a long-lasting impact, establishing the dominance of American trucks and making it difficult for foreign manufacturers to catch up, even if the tax were to be removed.
German families in the 60s loved tasty, cheap American-raised chicken that was suddenly coming in after the war. And Americans were loving fun, cheap Volkswagen Beetles. This arrangement was too good to last.
Today on the show, how a trade dispute over frozen chicken parts changed the American auto industry as we know it.
This episode was reported by Robert Smith and Sonari Glinton. It was produced by Frances Harlow.