The "chicken tax" and the U.S. auto industry
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What is the chicken tax and how did it originate?
How everyone with a pickup truck has felt the effects of a tariff that never goes away. I'm David Brancaccio. After the Dow rose 1,325 points yesterday, 2.9%. Futures are down 0.3% this morning. The wholesale price of oil down 17% yesterday is back up nearly 5% this morning, $99 a barrel. It's about market players trying to guess if the U.S.-Iran ceasefire will hold. Here's Marketplace's Nancy Marshall-Genzer.
The Dow Jones Industrial Average surged more than 1,300 points yesterday. The Nasdaq and S&P each popped up more than 2 percent. But traders are more tentative this morning. Iran says Israel's attacks on Lebanon are violations of the ceasefire. The truce was contingent on Iran reopening the Strait of Hormuz, but Iran says it's now closed. In a social media post last night, President Trump said U.S. forces would remain in the region until what he called a real agreement is fully complied with. I'm Nancy Marshall-Genzer for Marketplace.
How did the chicken tax impact the U.S. auto industry?
We get a key inflation reading later this morning. Ahead of that, interest rates are steady.
Thank you.
I'm just back from 900 miles on historic Route 66, which turns 100 this year. It was the Pacific Ocean to Albuquerque stretch, first in a Waymo driverless taxi, then a carbon-rich 1966 Oldsmobile for about a minute, then my plug-in gas-electric hybrid Chevy Volt for a while, and then my friend's all-electric SUV. Me and two pals, Jamie Kittman, a veteran automotive writer, and John Krafcik, a veteran automotive CEO. And at this time of reverse globalization, those two car guys kept referring to something called the chicken tax. John's on the board at Rivian now, so you can guess the brand of electric car we were sitting in when I got John to tell this story of transatlantic protectionism. So...
This is something that started, believe it or not, back in the early 60s. U.S. poultry producers were revolutionizing the global chicken industry, and they had figured out a way to mass produce chickens. And it turns out Germany had a need for more chickens, and they were interested in importing more of these chickens. However, the German poultry farmers were a little bit upset. They convinced the German government to put a tariff on those chickens.
What are the long-term effects of the chicken tax on vehicle prices?
The U.S. had a response to the tariff that the Europeans put on our chickens. What was it? Well, that's right.
They put a 25% tariff on all light-duty commercial vehicles or trucks, things that we know today as pickup trucks or commercial vans. But the interesting thing is they applied that tariff not just to the globally. And lo and behold, David, 60 years later, the chicken tax is still in effect. And I think it is one of the most important formative aspects of how the US industry has evolved during those six decades. You think, as a person with long experience in the automotive industry, that the effects of that tariff can still be seen in the market today? to innovate back.
So all this innovation, then the response to the chicken tax, the light duty truck tariff. Absolutely.
And then Detroit took a different approach because Volkswagen decided, hmm, it's hard for us now to send our combi vans across the Atlantic to the U.S. market because that 25% tariff raises the price so much.
How has the chicken tax influenced automotive innovation?
So American car and truck buyers, we lost all of that opportunity to consume low-priced imported trucks. And we got stuck with full-size pickup trucks and full-size commercial vans, and that's been pretty much it for the last 60 or so years.
Spectacular is the word that best describes the power behind all 62 Chevy trucks.
You look at that pickup truck from 1962, and it looks pretty much like a pickup truck you're going to buy today, maybe a little less aerodynamic. But do you think that this tariff may have kind of preserved the status quo when you compare the truck from 60 years ago and the truck now?
Yeah, I mean, the architecture of a 2026 full-size Detroit pickup truck, pretty much the same as what we had back in the 60s.
Now, U.S. automakers make a lot of money off of those light duty trucks, the pickup trucks.
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Chapters
6 chapters
1
What is the chicken tax and how did it originate?
0:01–1:05
2
How did the chicken tax impact the U.S. auto industry?
1:05–2:51
3
What are the long-term effects of the chicken tax on vehicle prices?
2:51–4:15
4
How has the chicken tax influenced automotive innovation?
4:15–5:31
5
What challenges do U.S. automakers face due to tariffs today?
5:31–6:37
6
How do current tariffs affect small American businesses?
6:37–7:40