Chicken tax

The Chicken Tax is a 25 percent tariff on light trucks (and originally on potato starch, dextrin, and brandy) imposed in 1964 by the United States under President Lyndon B. Johnson in response to tariffs placed by France and West Germany on importation of U.S. chicken.^[1] The period from 1961 to 1964^[2] of tensions and negotiations surrounding the issue was known as the "Chicken War", taking place at the height of Cold War politics.^[3]

Eventually, the tariffs on potato starch, dextrin, and brandy were lifted,^[4] but since 1964 this form of protectionism has remained in place to give US domestic automakers an advantage over imported competitors.^[5] Though concern remains about its repeal,^[6][7] a 2003 Cato Institute study called the tariff "a policy in search of a rationale."^[4]

As an unintended consequence, several importers of light trucks have circumvented the tariff via loopholes, known as tariff engineering. For example, Ford, which was one of the main beneficiaries of the tax, also evaded it by manufacturing first-generation Transit Connect light trucks for the US market in Turkey; these Transits were fitted-out as passenger vehicles, which allowed Ford to evade the Chicken Tax when the vehicles passed customs in the US. The Transits were stripped pre-sale of their rear seats and seatbelts.^[1] Similarly, to import cargo vans built in Germany, Mercedes disassembled fully-completed vehicles and shipped the components to "a small kit assembly building" in South Carolina, where they were reassembled.^[8] The resulting vehicles emerged as locally manufactured, free from the tariff. Several^[which?] such loopholes were subsequently closed by the U.S. Customs and Border Protection^{[citation needed]}. Light trucks manufactured in Mexico and Canada, such as the Ram series of trucks manufactured in Saltillo, Mexico, and Canadian-built Chevrolet, GMC, and Ford truck models, are not subject to the tax under the North American Free Trade Agreement,^[9] and from July 1, 2020, the United States–Mexico–Canada Agreement.