IT ALL STARTED WITH CHICKEN
World War II ended in 1945. While Europe spent the next 15-20 years rebuilding from the ground up, the United States capitalized on a highly efficient, state-of-the-art, commercial industrial complex.
Remember, just about every American who didn’t ship out to fight the Nazis was, in some way, involved in keeping American factories running full steam ahead in support of the mission. When the war was over, some of those factories literally transitioned from focusing on arms to farms.
It wasn’t long before all that technology and innovation resulted in “intensive chicken farming.” Before this, it wasn’t possible to supply enough chicken to meet global demand. Up until the 1960s, chicken was still mostly raised the old fashioned way—by hand.
PREVIOUSLY, ON STFU & GTFO:
Where do we go from here?
Frankly, I’m not sure. As a gearhead myself, I’m about as far removed from the realities of the automotive industry as anyone I’ve mentioned above. But I’m gonna start investigating this.
I’ve asked a few questions here and there and got a few ledes. Initially, I’m thinking we’ll dig into the regulatory issues keeping the Pajero and Triton out of the USDM. (I’m having trouble finding sales numbers for the turbo/NT DSM and Evo, remember.)
And we’ll see where that leads us. Being a Mitsubishi guy, I’m going to research Mitsubishi models, but I’m open to working and sharing insights with anyone who knows this space and wants to help change hearts and minds. Please get in touch.
[ Note: This piece took WAY longer than I thought to write. It’s like trying to narrate an afternoon of chasing Wikipedia rabbit holes and then writing a research paper on it. I get a bit snarky at the end. As always, I’m open to expert opinion to clarify things. ]
TRADE WAR. STUPID IS AS STUPID DOES.
Simple supply and demand, people wanted more chicken. Mass produced poultry quickly brought prices down, which flooded the European market with American chicken. When European farmers couldn’t compete, they raised hell until their governments did something about it.
France and West Germany had stepped up and pushed the common market (read: European Economic Community, which would eventually be absorbed into the European Union, or EU) to set a minimum price on all imported chicken.
By 1962, US chicken farmers had lost 25% of their business, about US$26-28 million. That’s US$214 million in 2018 dollars, by the way, about the cost of an Epi Pen or your annual out of pocket expenses with “good” insurance. Those American farmers raised hell until their government did something about it.
Can you say “trade war”? (I knew you could.)
THE CHICKEN TAX IS BORN
In January 1964 (this is, like, two months after Kennedy was assassinated, by the way), President Johnson signed an executive order placing a 25% tariff on imported potato starch, dextrin, brandy, and light trucks.”
Whoa, whoa, WHOA! Where the hell did light trucks come from in all this?
Well, under the General Agreement on Tariffs and Trade (GATT, precursor to the World Trade Organization, WTO, which was a thing a bunch of countries signed onto after WWII to try playing fair with everyone’s best interests in mind), any country affected by discriminating tariffs could increase tariffs to offset the losses they incurred.
Remember who started the trade war just two years prior? France and West Germany. I couldn’t find a source to confirm West Germany’s biggest export in the 1960s, but I’ll give you one guess. Hint: In 2017, it was vehicles.
BACK WHEN WORKING CLASS PEOPLE HAD A VOICE
Facing a potentially economy-wrecking strike in a presidential election year, Johnson went to UAW (United Auto Workers, much respect) president, Walter Reuther, looking to do a little horse trading. Reuther said his people weren’t very happy about all the Volkswagens coming into the US.
I pulled some USDM MSRPs from NADA:
- Volkswagen Pickup (Double Cab) – $2,175 in 1963, to $2,499 in 1965
- Chevrolet C10 (½-ton Fleetside Shortbed) – $2,025 in 1964, to $2,023 in 1965
- Ford F100 (½-ton Flareside Shortbed) – $2,002 in 1963, to $1,966 in 1965
By the end of 1964, two-thirds of West German-imported light truck sales in the US evaporated and VW pulled them from the USDM. Toyota, Datsun, Mazda, and Isuzu pulled their trucks out too.
An honest attempt at finding out if the Chicken Tax still applies to anything BUT light trucks at this point turned up mostly a bunch of articles from all the biggest names in media who no doubt leaned as heavily on the Wikipedia article as I did to say basically the same thing.
WHAT DOES THIS ALL MEAN?
The Big Three US automakers—General Motors, Chrysler-Fiat, and Ford—have lobbied to keep this, likely the ONLY piece of the original Chicken Tax still in effect after over 50 years in place. And this is precisely why you can’t buy that new HiLux, Patrol, Pajero, Delica, or whatever in the United States.
I did a little light truck shopping down under (Bris, 9001):
- 2018 Toyota HiLux SR5 – AU$58,773 (US$45,008) +25% = $56,260
- 2018 Nissan Navara ST-X 4×4 Dual-Cab – AU$57,625 (US$44,129) +25% = $55,161
- 2018 Mitsubishi Triton Blackline Double Cab – AU$41,490 (US$31,773) +25% = $39,716
Compare those post-Chicken-Tax prices to these new, domestic models:
- 2018 Chevy Silverado 1500 4WD Double Cab 143.5” (V8) – $40,890
- 2018 Ford F-150 King Ranch 4WD SuperCrew 5.5ft (V8) – $56,655
- 2018 Dodge Ram Big Horn 4X4 Crew Cab 5’7” (Cummins) – $50,485
*Prices sourced from NADA Guides, again
“Ah-ha!” The Mitsubishi fans in the audience are thinking, “The Triton would STILL be competitive and easily sell in the United States! Mitsubishi IS stupid for not selling it here!”
Except, here’s a list of 2018 MY, 4WD light trucks currently on-sale in the US for LESS than US$39k MSRP at press time:
- Nissan Titan XD Single Cab – $35,070
- Ford F-150 XL SuperCab 6.5’ – $35,125
- Toyota Tacoma TRD Off Road Access Cab 6’ Bed V6 AT – $35,180
- Ram Truck 2500 Tradesman Reg Cab 8’ Box – $35,345
- Toyota Tundra SR Double Cab 6/5’ Bed 5.7L – $35,440
- Ford Super Duty F-250 SRW XL Reg Cab 8’ Box – $35,685
- GMC Canyon Ext Cab 128.3” All Terrain w/ Leather – $35,700
- Ram Truck 1500 Big Horn Regular Cab 6’4” Box – $36,030
- Nissan Titan King Cab S – $36,030
- Chevrolet Colorado Crew Cab 128.3” Z71 – $36,200
- Chevrolet Silverado 1500 Double Cab 143.5” Work Truck – $36,300
- Nissan Frontier Crew Cab SL – $36,400
- Ram Truck 3500 Tradesman Reg Cab 8’ Box – $36,445
- Ford Super Duty F-350 SRW XL Reg Cab 8’ Box – $36,860
- GMC Sierra 1500 Double Cab 143.5” – $37,000
- Chevrolet Silverado 2500HD Reg Cab 133.6” Work Truck – $37,200
- GMC Sierra 2500HD Reg Cab 133.6” – $37,700
- Chevrolet Silverado 3500HD Reg Cab 133.6” Work Truck – $38,300
- Ford Super Duty F-350 DRW XL Reg Cab 8’ Box – $38,345
- GMC Sierra 3500HD Reg Cab 133.6” – $38,800
Without the Chicken Tax, the fully loaded, Mitsubishi Triton would be 10% less than the least expensive 2018 light truck in the US. If Mitsubishi could sell the Triton in the US without a 25% penalty tacked on, it would very easily become the #1 best-selling pickup in the US—or at least, force everyone else in the market to reduce their prices (read: profits) in order to compete.
WHO’S STUPID NOW?
Mitsubishi has a 4WD, 4-door, turbo-diesel pickup with a factory locking rear differential, that makes 178hp/317tq and gets 30mpg—for AT LEAST 10% less than anything else available in the USDM.
That’s not stupid. In fact, it makes it perfectly obvious why the Big Three continue lobbying to keep the Chicken Tax year after year. Remember, those three Australian market trucks back there are top of the line. Prices start as much as $10,000 less.
- The HiLux WorkMate starts at AU$26,218. That’s US$20,122.
- The Nissan Navara starts at AU$37,025. That’s US$28,416.
- And the Mitsubishi Triton starts at AU$32,990. US$25,319.
These three little trucks would eat the Big Three’s lunch. And there is no way they’ll let that happen.
They’re not concerned about $40-$50k models from Toyota, Nissan, and Mitsubishi. They’re concerned about losing tens of thousands of sales to $25-$35k models from those brands—on top of being forced to slash prices on the units they DO sell people.
CHICKEN TAX LOOPHOLES
Basically, the Chicken Tax applies to light trucks not assembled in the United States. Which was extended to North America as part of NAFTA. Which is why…
- Toyota makes the Tacoma, Tundra, Sequoia, Highlander, and Sienna in Texas and Indiana.
- Honda makes the Ridgeline, CR-V, RDX, MDX, Odyssey, and Pilot in Ohio, Alabama, and Indiana.
- Nissan makes the Frontier, Titan, Pathfinder, and QX60 in Tennessee and Mississippi.
- Hyundai makes the Santa Fe in Alabama.
- Volkswagen makes the Atlas in Tennessee.
- BMW makes the X3, X4, X5, X6, and X7 in South Carolina.
- Mercedes makes the GLE, GLS, Sprinter, and Metris in South Carolina and Alabama.
And by “make” we could be talking about “re-assembly of previously completed vehicles partially disassembled into ‘knockdown kits’ designed to squeeze through the ‘assembled in North America’ loophole in the Chicken Tax.”
EXAMPLE: FORD TRANSIT CONNECT
Ford presents a classic example of what OEMs will do to get around the Chicken Tax. You know the little Transit Connect? Sure you do. You probably see a dozen a day, wrapped in commercial liveries. Because they’re small, commercial vehicles—light trucks.
The Transit Connect is built in Turkey, Romania, and Spain. (Hey. Ford’s always been a true, global player. Fiesta, Focus, Sierra—these all came from Europe.)
In order to skirt the Chicken Tax, themselves, they ship Transit Connects to North America with back seats, seat belts, and rear windows. Before they go to the dealer, Ford’s importer would remove all of the above, shred it, and have it recycled—so they could bring in a “passenger car” and sell a light truck.
In 2013, the government got wise and told them to knock it off. Now they pay the 25% tariff themselves.
EXAMPLE: MERCEDES SPRINTER
I have to mention, Daimler has started manufacturing the Sprinter in the US, but as recently as 2014, US-bound Sprinters were fully assembled and drive tested in Germany, before having their powertrains and fuel systems removed and shipped separately.
Once in the US (on two separate ships, no less), the powertrains and chassis were reunited. Literally! Everything that came out of Truck A in Germany was reinstalled right back into Truck A in the US.
Crazy.
HONDA’S 5TH PLACE TRUCK OF THE YEAR
The 2017 North American Truck of the Year, as declared by a number of media outlets, was the Honda Ridgeline. That’s right. HONDA made the North American Truck of the Year last year.
They sold 2,106 of them in January. It was the FIFTH most popular small truck by sales that month.
GM sold 2,171 Canyons (aka: Colorado).
Nissan sold 5,901 Frontiers.
Chevy sold another 8,011 Colorados.
And Toyota sold 16,712 Tacomas. That’s more than second, third, and fourth place combined. You saw it up in the list above. Prices start at $25,500. And they’re selling them like hotcakes.
The Toyota story is interesting in its own right. Toyota tried a few tricks to get around the Chicken Tax back in the early 90s, but then started building the Tacoma in the US. They’ve been selling midsized trucks in North America pretty much non-stop since they started and have pretty much cornered the market. I’ve reached out and asked some Toyota experts if they can elaborate on this for us.
Fat cats would go VERY hungry if it weren’t for the Chicken Tax.
It’s so important these brands maintain this 50-year old protection from true, global competition (you know, that “free market economy” they like talking about at the slightest hint of regulation, but I digress), they bend over backward to get through the loopholes, themselves.
WHAT’S AT RISK
You’re reading this and you’re maybe thinking, “This is bullshit. The Chicken Tax protects the Big Three from real competition.” And you’re right. Which is why you will almost NEVER see a Chevy, Dodge, or Ford full-sized truck outside North America. They’re too big. They don’t get good enough fuel economy. And they’re too expensive.
If the Chicken Tax were repealed tomorrow, the Big Three would be in deep shit.
And that’s why the Chicken Tax isn’t likely to be repealed anytime soon.
Which is why you’re not buying a new Mitsubishi truck in North America.
Think that’s bullshit? I agree! But bitching and moaning does nothing to solve the problem.
I know the UAW could be competitive. I’m sure the Big Three could be too if they put their minds to it, but ending the Chicken Tax overnight would effectively destroy the North American auto industry.
So, if you want a new Pajero, Delica, or Triton in North America, we either need to drive up global demand like I suggested last time out, or we need to figure out how to end the Chicken Tax without blowing up the domestic auto industry.
Next time you see some barely literate sycophant accusing Mitsubishi of being stupid for truck-related matters, ask them to put up or shut up. You’re either part of the solution, part of the problem, or just part of the landscape.
Until next time, I’ll be looking into what rebates, depreciation, and lease vs. buy stuff means (because it was suggested and very interesting). I’ll also let you know what I hear back from the Toyota experts.
SOURCES USED (if you’d like to keep exploring this topic)
Wikipedia: Chicken Tax | Wikipedia: Ford Transit Connect | World’s Top Exports: Germany | Proclamation 3564 | PickupTrucks.com
SEE ALSO
Forbes: If you aren’t worried about a trade war, you don’t know about the Chicken Tax
