Friday, January 27, 2017

Ever hear of the "chicken tax"?


Back in the late 1950's US agriculture figured they could package frozen chicken and sell it in Europe, which was finally recovering from WWII.  European-raised chicken was expensive, more than most people could afford, but the imported American frozen chicken was affordable and sold very well.  Too well according to German chicken farmers, who asked their government for a tariff on imported American chicken in order to protect themselves.

The US said, whoa, whoa....not so fast.  This was back when Volkswagen's first began pouring into the US.  In fact they became cult cars....everyone wanted a beetle, or the even more oddball VW bus.  Seeing they were on a roll (pardon the pun) VW decided to chop the back off a VW bus and put a pickup truck bed there instead....home-run, right?

To retaliate for Germany's tariff on American chicken, the US imposed a 25% tariff on foreign-made trucks sold here.  This became known as the "chicken tax" and it exists to this day.  Tit for tat, that's invariably the way tariffs work out.  This shut down VW pickup sales instantly....with a 25% tariff they were then waaay too expensive. We lost chickens sales, they lost truck sales.  Lose-lose.

Fast forward half a century and it looks like the US is threatening a similar trade war with Mexico.  

"Pay for 'The Wall' or we'll tax your stuff being imported into the US by 35%."  

"No, wait, make that 20%."  

"Hold on, we're still doing the math....we'll get back to you...."

For the record, we sell several hundred BILLION dollars worth of "stuff" to Mexico every year, much of it components that are incorporated into the products they sell back to us.  In other words, if we put a tariff on their stuff, we're also killing the demand for (some of) the products they're buying from us.  This is simple Economics 101.

The Mexicans won't even have to pass a retaliatory tariff on American products because we'll already be shooting ourselves in the foot.  By putting a punitive tax on Mexican goods, we'll be costing AMERICAN jobs, too.  DUH!

All this for a border wall?  Have you ever heard of a wall that can't be climbed over or tunneled under?*  A wall might work in Israel because they have a soldier every 50 feet (slightly exaggerated) to watch their wall.   (Maybe we should just contract our southern border security to Israel?)  

We need to de-couple "The Wall" from NAFTA, and then respectfully renegotiate NAFTA.  Come on Prez Donnie John Trump.  Slow down and THINK.

S

*  Where there's a will, there's a way:  Foreign auto makers finally figured out a way around the chicken tax.  Ford/England, Mercedes, and others began shipping truck assemblies (complete cabs, beds, etc) to the US, then simply bolting them together in a US warehouse.  

Mercedes sent "passenger" vans here, then took out the seats, put in solid panels to replace the side/rear glass, and then sold them here as cargo trucks/vans, minus the tariff.  The removed seats were then sent back to Germany to be re-installed in the next batch of "passenger" vans being sent here, over and over. 



5 comments:

  1. "We'll build a wall and Mexico will pay for it." Yeah, right. A 20% tariff (or any tariff) will have the impacts you mentioned and Mexico still won't be paying for it. We consumers will pay for it on the increased cost of what we buy. That's Trump's idea of Mexico *paying* for it. Didn't someone a while back coin the phrase "bait and switch?"

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  2. The problem when you have a president who just says whatever the hell he thinks on Twitter is you end up with stupid shit like this becoming "policy" without any thought or evaluation. Now some poor number crunchers have to try to come up with a way to make that not sound completely horrible.

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  3. When you ask trump to 'think', you're looking for a quality not present.

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  4. Mexico will never pay for a wall we don't even need. People won't come here illegally if they can't find work and all we need to do is levy draconian fines on companies hiring people who can't prove they're here legally. Unfortunately, too many of those employers are big time supporters of the Republican Party so I doubt any fines will be forthcoming.

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  5. I have my own, personal plan to keep myself from going insane with worry about all the stuff might happen. If that wall is built, I'll buy stock in drone companies. That will immediately solve my fear about Social Security getting gutted.

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