Question

For some vehicles, (Ford Transit Connect, Toyota Tacoma) their manufacturing strategy is a result of the Chicken Tax that was placed on imported trucks by the Johnson administration back in the 1960s.....So, what is this tax, and what has its impact been on the US automotive industry, that is, what have companies done to get around it through tariff engineering their products? Do you think its time for this tariff to go away?

Answer 1

The chicken tax is a 25% tariff placed on imported automobiles in 1964. It was applicable only on light trucks. It was imposed in retaliation for tariffs imposed by France and West Germany on US exported chicken (hence the name).

It was placed to protect US automobole companies, but as US automobiles companies themselves wanted to produce in many other countries due to cheaper costs, it became a hindrance to them. So they circumvanted it by tariff engineering. This means that they would produce all parts in other countries, bring the parts to US and assemble them in the US to give them made in USA tag to avoid the tariff. Other companies would make the whole truck outside, but strip a few part and bring it in the US without tariffs (since the tariff was only applicable to light trucks and because some parts were removed the vehicle was not a light truck technically) and then add the parts and sell it.

Yes the tariff should be removed in my opinion. Volkswagen, the original target of the tax, doesnt even produce light trucks any longer. All important automobile players are already in the US market. US companies themselves are circumventing this tariff. It is no longer clear who this tariff is for and why. Hence, it should be removed.