[Colin]

The TPP was signed today for better or worse. Some Americans may lose their truck manufacturing jobs, but it may make small trucks cheaper for consumers.

I am talking about the Chicken Tax, implemented by LBJ as some cold-as-ice revenge on France and Germany back in the ‘60s. France and Germany had the nerve to put a tariff on American chickens going into their countries, so LBJ and the UAW’s Walter Reuther hit them with a 25% import duty on potato starch, dextrin, brandy, and small pickups.

But that was half a century ago. In the meantime, the Chicken Tax has done much more to mess with the American auto market than anything else. Automotive News, interviewing former head of Hyundai in the U.S. John Krafcik, explains how the tax helped dumb down this country’s biggest car segment.

To sell a pickup truck in America while avoiding the Chicken Tax, a truck has to be built in the America, too. And for a foreign carmaker, that means building a new factory to build the truck. That’s not cheap. Krafcik puts the cost in the billions. With such a big investment, the foreign carmaker has to be sure it can recoup that initial cost, and that means they play things safe and avoid risk. So they invariably choose to build full-size trucks, as full-size trucks are the most common, profitable trucks in the U.S. They are the safest bet.

Krafcik elaborated, stating, “I think what is lost the most is low-volume experimentation and innovation in pickups. As soon as you get to that level of investment, the risks become so great that the solutions become fairly mainstream.”

Now Korea hasn't signed on yet, but it could in the future -- it wants to. All the sudden Asian trucks could make a big play to move into America, while Eurpoean trucks are still restricted. How fun. Let's play in the truck game, and the Europeans aren't invited.

The Trans Pacific Partnership Is A First Step To Cheap, Small Pickups In The U.S.

 

[Cruizin]

The TPP only includes Asian countries?

 

[Santana]

The TPP only includes Asian countries?

I think it also includes the Americas, Canada and US. Not sure about the rest.

 

[Cruizin]

If Hyundai already has a small truck production plant in a TPP country the cost of the Santa Cruz should be lower because there will be no need for a new plant or equipment to build part of it on American soil. Should also open up the American market to other small truck models.

 

[Colin]

I suppose even European brands could produce their trucks in those countries and then ship them to the US which would avoid tariffs.

 

[Santana]

That's a good point and something that might just play into us seeing that segment pop up maybe faster than it could have if it wasn't for TPP, same for other new and upcoming segments.

 

[Cruizin]

I suppose even European brands could produce their trucks in those countries and then ship them to the US which would avoid tariffs.

They probably thought of this while drafting the TPP and European cars may be exempt from this.

 

[Santana]

You bet, along with how it impacts just about everything. Things like that take years to put together, all while it's out of the public's eye, i'm sure there has been websites covering what more we can expect of TPP

 

[Colin]

I read the truck thing will take ten years to phase in though so its pretty far into the future that it will take effect.

 

[Cruizin]

?? Are you talking about finishing compact trucks outside of the U.S?

 

[Santana]

Might take a while but timing is key and that's what they figured to be the right time for it to happen, otherwise they would have done it earlier or even held of on it for later.

 

[Colin]

?? Are you talking about finishing compact trucks outside of the U.S?

Yep. It has long been a tariff, but it will phase out so that production can happen outside the US.

 

[Cruizin]

Thought it would be an instant change once the agreement has been signed.

 

[Colin]

Thought it would be an instant change once the agreement has been signed.

Haha, nope. The US basically negotiated this 10 year phase in because they really like that tariff. It was one of their things that they really stuck to in the negotiations I have read.