Tax Refund

The “Chicken Tax” is a 25 percent tariff on imported light-trucks that was first imposed in 1964, in response to tariffs levied by some European nations on US poultry products – hence the name. The silliness of the name aside, the tariff affects the US market for automobiles. But how much is it responsible for American consumers purchasing larger trucks? The answer isn’t as clear as some think.

It is true that foreign trucks are typically smaller than those sold in the US, and the tariff arguably prevents them from reaching US customers.

But evidence suggests that the tariff, while far from ideal, isn’t what’s driving the interest in larger pickup trucks. Some manufacturers abroad have found ways to skirt the Chicken Tax. The Subaru Brat, for example, was a pickup truck with seats built in the back, thus classifying it as a passenger car.

Even domestic manufacturers, such as Ford, have engaged in tactics to avoid the tariff. For years, the Ford Transit Connect was built overseas with seats and thus considered a passenger car. Once brought into this country, the seats were removed and destroyed, allowing it to be used as a truck.

And of course, some foreign manufacturers have built factories in this country and trucks built in them aren’t subject to the tariff. Yet these trucks, such as the Toyota Tundra, are similar in size to trucks produced by domestic manufacturers.  

If people only wanted to purchase small trucks, domestic manufacturers would build and sell them. The increased size of pickup trucks therefore probably has more to do with driver demand.

Why would US drivers want large trucks? They may be perceived to be safer for the driver and passengers, though the opposite is true for those outside of the truck. Also, gasoline is much less expensive in the US than in Europe. Currently, gas in the US sells for about $3.50 a gallon, while prices in Europe range from $5 to $8 a gallon. This means that for the same number of miles driven, Americans can afford to use automobiles that consume more gasoline.

Another factor beyond the Chicken Tax is the Corporate Average Fuel Efficiency (CAFE) standards manufacturers must meet with their entire fleet of vehicles. CAFE standards have always been lower for trucks, and since 2011 the standard has been based on the “footprint” of the vehicle. This means that larger trucks face lower mileage requirements than smaller trucks. Absent this change, manufacturers may not have been able to produce larger trucks while still meeting CAFE standards.

Tariffs in general hurt consumers, and the Chicken Tax is no exception. Repealing the tariff would introduce more competition to the auto industry and provide consumers with more choices.

Source link

Leave a Reply

Your email address will not be published. Required fields are marked *