Chickens and the Auto Industry
Have you been following the recent trade squabble between the US & China? The US imposed a tariff on Chinese tires, now China is threatening to respond with a tariff on US chickens. It reminds me of a story.
Did you know that the decline of the US auto industry can be traced (in part) to chickens? Back in 1962, when the European Common Market was first forming, they placed a tariff on US chickens. In response, the US placed a tariff on European small trucks (primarily VW). A car coming into the US faced a tariff of roughly 2.5%. For a light truck or van, that was 25%. That tariff remains in place today. As a result of this, US auto manufacturers haven’t faced as much competition in the light truck market as they have in the car market. As you may remember, when things got tough for the US auto industry, they started putting more and more of their development effort into pickups and SUVs. There’s probably a connection, don’t you think? The problem, of course, is that gas prices started rising sharply. US customers wanted fuel efficient cars, but that’s not what Detroit was developing any more.
You can read some more on this subject at Dani Rodrik’s blog. You can also read this post to learn about the sort of workarounds that result from the chicken tax.