Posted: JANUARY 31, 2025
The Chicken Tax
How a Poultry Tariff Reshaped America’s Truck Market
Did you know that American pickup truck prices were influenced by U.S. chicken exports to Europe in the 1950s? At first glance, poultry and pickup trucks might seem unrelated, but the case of the infamous “Chicken Tax” shows us how tariffs can set in motion a chain reaction that lasts for decades.
Europe’s Response to the American Poultry Boom
In the late 1950s and early 1960s, American poultry farming was booming. The U.S. chicken output doubled within a decade thanks to improvements in breeding techniques, feed composition, and large-scale farming practices. Thanks to lower production costs, the United States found itself with an abundance of poultry, which it could sell in international markets at competitive prices.
When the more affordable American chicken entered European markets such as France and West Germany, local farmers were not happy. They lobbied their governments to take action and to protect them against the influx of cheaper chicken from the U.S. Several nations ended up imposing tariffs on U.S. chicken, effectively making it more expensive and less appealing in European markets.
In the late 1950s and early 1960s, American poultry farming was booming. The U.S. chicken output doubled within a decade thanks to improvements in breeding techniques, feed composition, and large-scale farming practices. Thanks to lower production costs, the United States found itself with an abundance of poultry, which it could sell in international markets at competitive prices.
When the more affordable American chicken entered European markets such as France and West Germany, local farmers were not happy. They lobbied their governments to take action and to protect them against the influx of cheaper chicken from the U.S. Several nations ended up imposing tariffs on U.S. chicken, effectively making it more expensive and less appealing in European markets.
Farmers from Belgium and the other member states of the European Economic Community (EEC) taking over the streets of Brussels in protests. (Nationaal Archief / CC0)
Retaliation: The Birth of the Chicken Tax
The United States government didn’t appreciate these poultry tariffs and decided to counter. In 1963, the U.S. imposed tariffs on certain European goods, including brandy, potato starch, dextrin, and, most importantly, light trucks. This retaliatory 25% tariff on light trucks became known as the Chicken Tax.
During this time, European car makers like Volkswagen were making successful entries into the U.S. market with vehicles such as the Volkswagen Type 2 van. The newly instated tariff was a blow to European light trucks. Data shows that European light truck exports dropped by almost half within a few short years.
The United States government didn’t appreciate these poultry tariffs and decided to counter. In 1963, the U.S. imposed tariffs on certain European goods, including brandy, potato starch, dextrin, and, most importantly, light trucks. This retaliatory 25% tariff on light trucks became known as the Chicken Tax.
During this time, European car makers like Volkswagen were making successful entries into the U.S. market with vehicles such as the Volkswagen Type 2 van. The newly instated tariff was a blow to European light trucks. Data shows that European light truck exports dropped by almost half within a few short years.
The U.S. Auto Industry: U.S. Factory Sales, Retail Sales, Imports, Exports, Apparent Consumption, Suggested Retail Prices, and Trade Balances With Selected Countries for Motor Vehicles, 1964-81
United States International Trade Commission Publication 1329, December 1982
United States International Trade Commission Publication 1329, December 1982
A “Temporary” Measure That Stayed
Even though the Chicken Tax was supposed to be a short-term retaliatory measure, it remained in place long after the chicken dispute ceased to make headlines.
The Chicken tax ended up contributing to the reshaping of the automotive industry in the U.S. through three key factors:
Even though the Chicken Tax was supposed to be a short-term retaliatory measure, it remained in place long after the chicken dispute ceased to make headlines.
The Chicken tax ended up contributing to the reshaping of the automotive industry in the U.S. through three key factors:
The Harmonized Tariff Schedule (HTS) sets out the tariff rates and statistical categories for all merchandise imported into the Unites States.
1
Leading to market share shifts: When foreign automakers reduced exports due to higher tariffs, domestic manufacturers like Ford and GM filled the void by producing more pickup trucks. Over time, their market share grew and today approximately 80% of all new light trucks sold in the U.S. are manufactured in America.
2
Shifting strategies of foreign automakers: In order to avoid tariffs, foreign automakers tried to find loopholes. One example is Subaru, which introduced rear-facing seats in the bed of its BRAT model, thereby allowing it to be classified as a passenger vehicle rather than a truck. This loophole was short-lived, and regulators modified such classifications one by one.
Eventually, companies such as Toyota, Honda, and Nissan concluded that opening factories in the U.S. was less costly than avoiding tariffs, and they invested in truck manufacturing plants in states like Texas.
Eventually, companies such as Toyota, Honda, and Nissan concluded that opening factories in the U.S. was less costly than avoiding tariffs, and they invested in truck manufacturing plants in states like Texas.
3
Impacting pricing: The tariffs ended up increasing the real prices of light trucks in the US by about 1.3% between 1990 and 2019, during a time when prices on passenger cars with lower tariffs fell slightly. This gap shows the long-term effect of the tariff on the broader market dynamics between trucks and cars.
Average New Light Truck Price in 2019 was 43% Higher than the Average New Car Price.
U.S. Department of Energy, Vehicle Technologies Office, Average Price of a New Car and Light Truck, 1990-2019
U.S. Department of Energy, Vehicle Technologies Office, Average Price of a New Car and Light Truck, 1990-2019
Why Does It Matter?
The Chicken Tax story proves how connected the global markets are. A problem that started in the U.S. poultry industry ultimately led to retaliatory tariffs in the automotive industry. This resulted in shifts in consumer demand, manufacturing, and prices.
Even if tariffs may seem like a technical or niche topic, their effects can ripple through everyday life. From what vehicles dominate our roads to the prices we pay at car dealerships, seemingly small decisions in international trade can leave a lasting mark.
The Chicken Tax story proves how connected the global markets are. A problem that started in the U.S. poultry industry ultimately led to retaliatory tariffs in the automotive industry. This resulted in shifts in consumer demand, manufacturing, and prices.
Even if tariffs may seem like a technical or niche topic, their effects can ripple through everyday life. From what vehicles dominate our roads to the prices we pay at car dealerships, seemingly small decisions in international trade can leave a lasting mark.
Chicken Tax: How a Poultry Tariff Shaped the U.S. Auto Industry
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