Why are microphones so expensive? Blame the Chicken Tax

Americans love their pickup trucks, and nowhere more than in Texas. But due to a combination of factors, new and used light trucks have become more expensive and harder to buy in 2022, and Washington is a big part of the problem.

Chip shortages and supply chain disruptions from COVID played a role, but so did US government policies. A prohibitive 25% tariff on imported trucks continues to restrict competition in the domestic market, inflating prices and leaving supply chains even more vulnerable to disruption.

As Texans know, pickup trucks aren’t necessarily a luxury item. Families find them useful for work and household chores, especially in rural areas. Light trucks are essential for towing trailers, boats and RVs, and trucks are popular for transporting family members safely and comfortably to school or the football game.

Yet owning a pickup truck has become more elusive for middle-class households. According to the US Bureau of Labor Statistics, prices for new cars and trucks in January were up 12% from a year earlier and prices for used vehicles were up 40%. Fewer units are available on dealer lots, and Ford has been forced to completely halt orders for its low-priced Maverick pickup due to production shortages.

Rising truck prices and production shortages are placing an inordinate cost on many Texan drivers. Even though less than one in ten Americans live in Texas, Texans buy one in six full-size pickups sold in the United States, according to MOTORTREND.

Contributing to shortages and lack of affordability is a 25% tariff on pickup trucks that dates back to a trade dispute with Europe in the 1960s. When the European Economic Community raised tariffs on chicken imported from the United States , President Lyndon Johnson retaliated with a 25% “chicken tax” on imported trucks and other items. The tariff originally targeted vehicles made by Volkswagen in West Germany, but even though the original chicken problem has been resolved and Germany no longer manufactures light trucks for the US market, the tariff remains in place. place by political inertia.

The truck tariff allows American automakers to dominate the domestic market. Ford F-Series, GM Silverado and Sierra, and Dodge Ram trucks account for 95% of light truck sales in the United States. Toyota employs more than 3,000 workers at its Texas plant near San Antonio that produces its Tundra line of pickup trucks, but they make up only a small share of the market and almost no trucks are imported from outside America. North because of the tariff. In 2021, Ford and GM posted record profits of nearly $10 billion each, with light trucks being their most profitable product line.

Instead of trying to repeal the tariff to make trucks more affordable, the US government has moved in the wrong direction in recent years. A free trade agreement between the United States and South Korea in 2011 was supposed to allow South Korea-made light trucks to be imported into the United States duty-free from 2021, but the Trump administration pushed the Koreans to postpone the elimination of tariffs until 2041. If these tariffs had been allowed to expire last year, the United States International Trade Commission estimated in a June 2018 report that 14 000 to 32,000 additional light trucks would have been available for sale each year in the US domestic market.

The Trump administration also renegotiated the 1994 North American Free Trade Agreement, replacing it with the United States-Mexico-Canada Agreement (USMCA). The revised agreement tightens the rules of origin to require that 45% of truck parts be made by North American workers who are paid more than $16 an hour. This non-mandatory provision for Mexicans will make it more expensive to manufacture pickup trucks in Mexico for duty-free shipment to the United States.

An April 2019 USITC study concluded that stricter USMCA motor vehicle rules will lead to higher prices for consumers and fewer vehicles available for sale in the US market. Unfortunately, the Biden administration is fighting to make the rules even more restrictive.

If the truck tariff were repealed, domestic production would remain at a robust level. For a number of reasons, it makes sense to manufacture trucks in the market where they are sold. Domestic production reduces transport costs while making it easier to adapt vehicle design to local consumer preferences. This is one of the reasons why international car manufacturers, such as Toyota, Nissan and BMW, produce hundreds of thousands of cars in the United States each year, even though the tariff on imported cars is relatively low at 2 .5%.

Congress and the president should work together to reduce or eliminate high tariffs on imported pickup trucks. The result would be increased competition, more flexible inventory and lower prices, making it more likely that Texans will find the right truck at the right price.

Daniel Griswold is an assistant research fellow at the Cato Institute in Washington, DC He wrote this column for The Dallas Morning News.

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