The Chicken War: How Tariffs Failed as a Tool for Trade Fairness

Are tariffs an effective tool for economic protection, or do they create more problems than they solve? This question has fueled debates between economists for decades. One famous instance of the use of tariffs is the so-called “Chicken War” of the 1960s. The Chicken War was a trade war between the United States and the European Economic Community, the predecessor of the EU, over import tariffs on frozen chickens from the United States. The Chicken War of the 1960s shows that tariffs often have negative consequences and can escalate into broader conflicts.

The US came out of World War II as the global economic hegemon, with its GDP accounting for nearly half of the global GDP (Allison, 2020). This economic strength resulted in American chicken farmers becoming so productive that they were flooding the West-German market with low-cost frozen chickens. Although this meant that West Germans could buy chickens at very low prices, the West German chicken farmers couldn’t compete with the more efficient US chicken farms, and many went out of business. The West German government was so upset about this that, together with the European Community as a whole, they instituted an import tariff of about 13 to 18 cents per pound of chicken, effectively doubling the price of frozen chicken from the US (Mislan & Streich, 2019).

One year later, after negotiations to abolish the import tariff on American frozen chickens fell through, the conflict escalated into a full-on trade war between the European Community and the US. The US instituted tariffs on products important to European exporters, such as potato starch and light trucks. Tensions between the two economic blocks became so high that the chair of the Senate Foreign Relations Committee threatened to pull US troops out of Berlin to put pressure on West Germany to abolish the tariff on frozen chickens (Miscamble, 1997).

For politicians, supporting tariffs can be beneficial because they can provide short-term economic and political benefits. Tariffs protect domestic industries by making foreign goods more expensive, which helps struggling sectors compete with cheaper imports. Tariffs are especially popular with voters from regions with a lot of manufacturing and agriculture. Tariffs can also be used to address unfair trade practices, whether real or imagined, signaling a strong stance against exploitation. Lastly, tariffs also generate government revenue without directly taxing citizens, making them a useful tool for generating tax revenue without voters realizing they are paying more in taxes.

There are of course legitimate reasons for instituting tariffs. In case of genuine unfair trade practices such as dumping (sales at less than fair value) and excessive government subsidies where there is cause for damages, a country has the right to institute a tariff to ensure a level playing field (Wolff, 2024). National security is another area where tariffs have a legitimate use (Lincicome & Manak, 2021). For industries like defense, energy, and technology, over-reliance on imports makes a country vulnerable during conflicts.

However, tariffs harm the economy in several ways. By increasing the price of imports, tariffs lead to higher costs for consumers and businesses relying on imported goods (Asoudourian & Wessel, 2024). This price distortion encourages domestic production in less efficient industries, which takes away resources from more competitive sectors. In the long term, tariffs are bad for the economy. They protect certain industries from international competition, and the economy as a whole suffers from lower growth, lower productivity, higher unemployment, and higher inequality (Furceri et al., 2018). Tariffs may be politically appealing, but they are damaging to the economy.

Instead of using tariffs to address trade fairness, there are smarter ways to tackle the issue. Trade negotiations are generally a better option. They not only help resolve disputes but can also build stronger relationships between trading partners. If both sides can reach an agreement, the issue is resolved without causing the economic headaches that come with tariffs. Sadly, the reality is that this is wishful thinking. Tariffs are an excellent way for politicians to show they care about the working class who have not benefited from globalization. Donald Trump demonstrated this in his first administration, imposing tariffs on China on imports such as steel and electronics and on the EU for aircraft, wine, and cheese. These tariffs have had a net negative effect on the US economy (Amiti, Redding, & Weinstein, 2019).

Politicians in favor of tariffs should know what they are getting their country into. The "Chicken War" of the 1960s shows how a tariff on frozen chickens can escalate into a larger conflict, which may never be resolved fully. The Chicken War did eventually calm down a bit, with the EEC rescinding its frozen chicken tariff and the US abolishing the tariffs on brandy and potato starch. The tariff on European trucks is still in place, however (Ikenson, 2003). So, even half a century later, a conflict started by cheap frozen chickens means that European car manufacturers need to pay a 25% tax when they export to the US.