What is the Chicken Tax and how does it parallel with the tariff soap opera today?
I was doing some research about EU vs. US tariffs and can’t across the term “chicken tax.” As I looked into what this term means, I saw a parallel to the focus on tariffs, risks of retaliation and a trade war today.
What is the Chicken Tax?
The Chicken Tax is a 25% import tariff levied by the U.S. on light trucks (pickups, vans, and some SUVs).
The history of the Chicken Tax
It all started in the early 1960s when U.S. farmers started selling large numbers of cheap chickens to West Germany and France.
In response to European farmers protests, these countries levied high tariffs on chickens imported from the U.S.
This led to President Johnson retaliating by imposing a 24% tariff on European light trucks and other products (e.g. potato starch, brandy and dextrin).
Post mortem
As time went on, all of these tariffs were rescinded except the one on light trucks, which remains on the books today.
The moral of the chicken tax story is that a tariff placed on one product can lead to retaliation with levies on unrelated imports, risking an escalation into a trade war. It is a good parallel to what is goig on today.
In this regard, keeping in mind that actions speak louder than words, this social media post by President Trump illustrates the risk of retaliation
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