In fact this probably gets to the most important fact on American vehicle import taxes. The rate on imported “cars” may be 2.5%, but it is 25% on foreign made light trucks.
This 25% tariff in 1964 was technically written to address an entire category in order to comply with GATT rules against retaliatory tariffs, but was specifically targeting the VW bus, because the EU had implemented a tariff against all foreign chicken. Because the EU taxed Europeans on foreign chicken to protect its domestic chicken production, the US taxed Americans on foreign made trucks to protect its domestic automakers, and these tariffs have been referred to as the “Chicken Tax” ever since.
The end result of chicken tax was the transformation of American roads, where the F-150 is the highest selling vehicle in most states. Rather than improving a product class, American automakers over time switched away from making cars and improving their offering, and toward making trucks where they would not need to compete.
The weakness of domestic trucks as a product might even contradict an argument for protective tariffs. Protection was not important for allowing a fledgling industry to flourish; instead it largely lead to abandoning one product class, and shifting development toward a class that was artificially protected from competitive pressure. This was especially problematic because these trucks were not marketable overseas. Partially, that is because American roads were always larger, but also because these were weak products that had been developed in an overprotected environment.
Isn't it ironic how overlooked this is in the current discussion? American cars makers struggle with global competition nowadays /because/ they have cornered themselves into an uncompetitive niche /because/ it was protected by a retaliatory tariff. Now what could possibly go wrong if you protect them some more!
This 25% tariff in 1964 was technically written to address an entire category in order to comply with GATT rules against retaliatory tariffs, but was specifically targeting the VW bus, because the EU had implemented a tariff against all foreign chicken. Because the EU taxed Europeans on foreign chicken to protect its domestic chicken production, the US taxed Americans on foreign made trucks to protect its domestic automakers, and these tariffs have been referred to as the “Chicken Tax” ever since.
The end result of chicken tax was the transformation of American roads, where the F-150 is the highest selling vehicle in most states. Rather than improving a product class, American automakers over time switched away from making cars and improving their offering, and toward making trucks where they would not need to compete.
The weakness of domestic trucks as a product might even contradict an argument for protective tariffs. Protection was not important for allowing a fledgling industry to flourish; instead it largely lead to abandoning one product class, and shifting development toward a class that was artificially protected from competitive pressure. This was especially problematic because these trucks were not marketable overseas. Partially, that is because American roads were always larger, but also because these were weak products that had been developed in an overprotected environment.