Sway Control – Chicken Tax Expiration – What Does It Mean for Trucks?
Will the U.S. Get More Imports?
For those of us in the industry, the term “chicken tax” needs no explanation. But for outsiders, the use of the term in the context of pickup trucks makes little to no sense. So what exactly is this poultry-themed tariff and what does it have to do with trucks? You have to go back more than 50 years to the administration of Lyndon B. Johnson for the origins of the act.
In the early 1960s, the U.S. was the world’s leading producer of poultry and exports of American chicken to the European markets depressed the price of chicken on the Continent to the point where European farmers were crying foul (pun intended). As a protective measure, several European countries, including France and Germany, levied tariffs against American poultry products. In retaliation, and under pressure from the United Auto Workers, the U.S. slapped a 25 percent tariff on European vehicles classified as light trucks, which was predominantly the flatbed configuration of the Volkswagen Transporter.
Unfortunately, the collateral casualties were also Japanese-brand pickups, which remained a relatively niche product until manufacturing commenced in the U.S. in the early ’80s, allowing the companies to circumvent the tax. An interesting workaround devised by GM when they were still importing the Isuzu-based Chevy LUV compact truck was to import the trucks without a bed. A similar type of Byzantine workaround was also in play when Ford started importing the first-generation Transit Connect from Turkey as passenger vans and literally shredding the second-row seats and replacing the rear glass with sheetmetal panels when they reached American ports.
With the likely imminent passage of the Trans Pacific Partnership trade pact, the Chicken Tax may soon be relegated to the history books. It won’t evaporate overnight but will likely be a years-long phaseout. Once the tariff has wound down, some speculate that the U.S. market could be flooded with imported trucks that have heretofore been too expensive to sell in the U.S. in light of the prohibitive levy. Although China, Thailand, and India are not yet official members in the trade pact, they have applied to be part of the free-trade bloc and will likely be the source of many of the trucks coming stateside in the future.
But fears by some that the U.S. truck market will be swamped with cheap imports may be unfounded. First, Nissan and Toyota both have substantial manufacturing footprints already established in the U.S., allowing them to sell trucks domestically at a competitive price point. Prior attempts at importing trucks by Mahindra and ongoing efforts by China’s Great Wall have so far proved fruitless. The Detroit Three have a virtual lock on the fullsize market, leaving the Toyota Tundra and forthcoming Nissan Titan to fight for the table scraps.
And GM’s ambitious pricing on the new Colorado and Canyon don’t seem to have hurt the trucks’ popularity one iota, validating the premise that buyers are willing to pay a premium price for a smaller truck. So should Detroit be worried that outsiders will swoop in and eat their lunch? Not overnight. It will likely take years (if not decades) for cheaper imports to make major inroads in the U.S. market, and the first generation imports from developing nations will likely be crude and built to a price. That will entice some entry-level buyers, but those accustomed to the refinement and sophistication of established U.S. market trucks are unlikely to be tempted.
But never say never. Just as the Korean brands proved, the transition from zero to hero can happen, but it took them the better part of two decades to move from being considered a used-car alternative to being a legitimate head-to-head competitor with established Japanese and American brands. Will the same thing happen in the U.S. market with trucks? Check back again in 2035.