A Modern Day Chicken Tariff War - How Trump’s Tariff Proposals Will Impact American Citizens and European Countries

Introduction

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In post WW2 Germany, people started consuming large amounts of American chicken, which prompted US chicken exports to rise to today’s equivalent of almost half a billion dollars  in the 60s (Library of Congress, 2023). What was the problem? European farmers became overshadowed by American ones, which led to the European Communities (precursor to the European Union) imposing tariffs on US chicken, i.e. forcing German companies to pay a 14% import tax. This prompted dissatisfaction between both US farmers and politicians since the national exports declined drastically, so the government retaliated by targeting Germany's most vulnerable sector: their vehicle exports. On an “eye for an eye” logic, the US imagined that adding a tariff on German trucks would convince Germany to drop the chicken tariffs. Not only did the scheme not work, but the truck tariffs have never been removed (WSJ, 2024). This story perfectly exemplifies the downsides of taxes: they raise prices for average consumers, offer vague benefits to specific industries and are fuelled more by ego than by economic backing.

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But what are tariffs, and why do they even exist if they’re harmful to the economy? Tariffs are taxes on imported goods, typically paid by importers. Until the 20th Century, they were the primary source of income for a lot of governments, until income taxes were introduced, so they did serve a purpose: to provide government income, to regulate trade and to protect domestic industries (The Guardian, 2024). The issue is, nowadays we live in a much more liberal and globalized economy - most countries specialize in a few unique products and import the rest. As modern globalization has shifted focus toward non-tariff barriers, i.e. regulations and quotas, tariffs only really exist in very specific competitive industries, and almost all international trade occurs tariff-free or with rates capped at 5%.

 

At the core of many trade disputes is a sense of national pride and protectionism, where leaders prioritize the interests of domestic industries, sometimes at the cost of broader economic health. This essay will explore how the tariffs proposed by Donald Trump will lead to higher prices and less downstream jobs for American civilians and to a potential European recession.

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Trump’s Tariffs: Impact on American Civilians and on European Countries

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Trump's Tariffs

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Right now, the US has import taxes of between 2-5% on most industries. Some very specific industries do have higher taxes - for example a 25% tariff on EU wine, cheese, olives and steel or a 25% import tax on Chinese electronics and machinery. So how does Trump plan to change this? He’s repeatedly said that he wants a 20% import tax on all foreign goods, a targeted 60% tariff on all China imported goods and potentially a 200% targeted import tax on some Mexican industries (Whyy.org, 2024). 

 

Historically, the US has a legacy of high tariffs which they imposed until the 20th Century in order to gain government revenue and to boost domestic production, which some argue contributed to the country's economic dominance. Trump campaigned on a populist platform of economic independence, using nationalist and nostalgic rhetoric to convince people that these tariffs would “Make America Great Again” (Mork, 2024). He also backs these proposals up by saying they will raise the state budget, create more jobs and revive industries that have been lost to globalization. There is significant ego involved, not only Trump’s but also the national pride rooted in the American dream—the belief that the U.S. is a "chosen" country that should maintain economic and political dominance. 

 

The problem is that in recent years several countries, most notably China, have been catching up to the US economy. Right now, China takes multiple actions that contribute to their economic expansion: they access very cheap labor, the government spends significant sums in key nationalized industries such as semiconductors, energy, green technology and telecommunications,  and they have a state-driven model that funds high-tech development and infrastructure in both China and in trade partner countries. This significantly impacts the US economy, as companies prefer to access raw materials at China’s prices and consumers seek to save money by purchasing cheaper imports. (WSJ, 2024). To address this, Trump seeks to impose significant tariffs on China, portraying the issue as a response to countries that have "taken advantage of the US." 

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Impact on the United States

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While Trump believes that these tariffs will raise the state budget, create more jobs and help citizens by stimulating local industries, an analysis of further impacts is necessary. When tariffs are imposed, companies that import products, raw materials for example, have to sell their finished products at a higher price in order to make up for the tariff. This impacts both prices and jobs in downstream industries, i.e. the industries that have to buy the tariff-imported materials. For example, Trump’s first term 25% steel tariffs led to higher prices for products like cars and home appliances (Fastmarkets, 2024). Because production gets more costly, downstream industries tend to react by either cutting jobs or lowering the wages or benefits of already existing workers. Furthermore, average workers have to also pay higher prices due to the tariffs. While Trump wants to argue that these tariffs will benefit the state budget, it will probably cost citizens billions of dollars, which seems to undermine the initial goal completely (PYMNTs., 2024). 

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Impact on European Countries

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European countries are still bound to suffer some consequences of the 20% tariffs on all foreign products; however, to what degree? Euroatlantic trade relations are crucial, with the EU as the US's largest trading partner, accounting for over $1 trillion annually. In 2023 alone, the EU exported goods worth $330 billion to the U.S., including automobiles, machinery, and pharmaceuticals (Investopedia, 2023). Any US tariffs will impact the ability of US companies to import from Europe, leading to a decline in European exports. This would not only affect European GDP, but also reduce investments in research and harm competitiveness. Also, due to the China tariffs, Chinese products could flood the European markets, which will worsen the aforementioned problems potentially triggering a European recession. In Europe, one question seems to be on everyone’s minds: how do we protect ourselves?

 

There’s quite a few ideas that have been proposed which will be analysed in this section. The EU could strike a deal with the US before imposing tariffs of their own (POLITICO, 2024). This could involve negotiating trade-offs that benefit both of the parties - for example agreements on reducing tariffs in certain sectors. Such a deal could focus on mutual benefits in sectors like green energy, where both parties seek to limit China’s global competitiveness, or aim to reinforce transatlantic ties amidst global economic instability caused by supply shocks, geopolitical conflicts, and political turmoil.

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In case of failure, the EU has an “Anti-Coercion Instrument” or ACI framework put in place, that provides the EU with multiple solutions to coercive measures coming from other countries (European Commission, 2023). This includes blocking certain key European exports such as advanced machinery or pharmaceuticals to put pressure on the US, blocking FDIs - Foreign Direct Investments - from investing in American industries or even striking back with tariffs of our own - like the US did during the chicken tariff war. All these measures would hurt certain American economic sectors, which can force the administration to drop the tariffs. Amid all of these measures, the EU would invest heavily in key sectors such as renewable energy, AI, and semiconductors to increase competitiveness, enhance economic resilience, and reduce dependency on external trade (EY, 2024).

 

Conclusion

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Economists are skeptical of tariffs because they drive up consumer prices, reduce jobs in downstream industries, and foster economic isolation—reasons that have led to minimal tariff imposition among WTO members. How European nations respond to US decisions—whether through negotiation, retaliation, or increased competitiveness—will determine the broader impact of these tariffs. The chicken tariff war from the past serves as a reminder: prioritizing national pride and ego over practical economic interests often leads to the suffering of ordinary citizens. Will history end up repeating itself, or are we able to break the cycle?

 

 

References

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CNBC. (2024). Whose tariffs are worst for The American consumer. [Video]. Youtube. https://www.youtube.com/watch?v=hCvs3ZmBkVk&list=TLPQMTkxMTIwMjRKnPwUdt45dg&index=4

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European Commission. (2023). Proposal for a regulation on an anti-coercion instrument. European Commission. https://trade.ec.europa.eu/access-to-markets/en/content/anti-coercion-instrument

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EY. (2024, September 21). EY announces new manifesto to boost EU competitiveness. EY. https://www.ey.com/en_gl/newsroom/2024/09/ey-announces-new-manifesto-to-boost-eu-competitiveness#:~:text=The%20EY%20organization%20recommendations%20included,market%20and%20combat%20financial%20crime.

 

Fastmarkets. (2024, November 27). Trade in the crosshairs: Trump’s steel tariffs and the ripple effect on global trade. Fastmarkets. https://www.fastmarkets.com/insights/trade-in-the-crosshairs-trumps-steel-tariffs-and-the-ripple-effect-on-global-trade/

 

Grantham Research Institute. (2024). If elected, Donald Trump’s proposed tariffs would damage the economies of United States, China, and Europe, and set back climate action. London School of Economics and Political Science. https://www.lse.ac.uk/granthaminstitute/news/if-elected-donald-trumps-proposed-tariffs-would-damage-the-economies-of-united-states-china-and-europe-and-set-back-climate-action/

 

Investopedia. (2023, February 17). How much does the US trade with the EU? Investopedia. https://www.investopedia.com/investing/how-much-does-us-trade-eu/

 

Library of Congress. (2023, December). Chickens, trucks, and tariffs: A 1960s trade war. https://blogs.loc.gov/law/2023/12/chickens-trucks-and-tariffs-a-1960s-trade-war/

 

Mork, A., & McPherson, E. (2024, September 13). Is Donald Trump’s populist rhetoric a threat to America’s democracy? Democratic Erosion. https://democratic-erosion.org/2024/09/13/is-donald-trump-a-threat-to-americas-democracy/

 

POLITICO. (2024). How the EU could respond. POLITICO. https://www.politico.eu/article/donald-trump-washington-us-elections-win-2024-kamala-harris-europe-russia/

 

PYMNTs. (2024). Trump tariffs could cost consumers $78 billion per year. PYMNTs https://www.pymnts.com/economy/2024/report-trump-tariffs-could-cost-consumers-78-billion-per-year/

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Raghavan, V. (2024, November 30). What economic challenges does Argentina face today? Economics Observatory. https://www.economicsobservatory.com/what-economic-challenges-does-argentina-face-today

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The Guardian. (2024, November 29). What are tariffs and how do they work? Explained in 30 seconds. https://www.theguardian.com/world/2024/nov/29/what-are-tariffs-and-how-do-they-work-explained-in-30-seconds

 

WSJ. (2024, November). Why Economists Hate Trump’s Tariff Plan. [Video]. YouTube. https://www.youtube.com/watch?v=_-eHOSq3oqI&t=336s

 

Whyy.org. (2024, September 13). Trump favors huge new tariffs: How do they work? WHYY. https://whyy.org/articles/elections-2024-trump-harris-tariffs-childcare/