Volkswagen Pushes for a Tariff Break on Mexico-Built Cars as It Rebuilds Its U.S. Game Plan
The automaker’s cheapest models are caught in a 25% import duty, and CEO Kjell Gruner says relief would help the whole industry. Meanwhile, the action is shifting toward Tennessee.
Volkswagen’s American arm looks like a different company than the one Kjell Gruner inherited when he took over as CEO in December 2024 — and a big reason is tariffs.
The German automaker leans heavily on Mexico to keep its U.S. showrooms stocked at the affordable end. The Jetta sedan and the Taos compact crossover, both assembled south of the border, are the two least-expensive vehicles VW sells in America, opening at roughly $25,300 and $28,000 with destination. They’re also the two most exposed to the 25% duty Washington has placed on Mexican-built light vehicles.
That math is exactly the problem Gruner is trying to solve.
A plea for parity
Gruner’s central ask is straightforward: bring the tariff on Mexico-made cars down to the kind of rate other major trading partners enjoy. Vehicles from places like Japan, South Korea and the European Union face duties closer to 15%, and Gruner argues that closing the gap for Mexico would deliver a meaningful lift — not just to Volkswagen, but to an industry already wrestling with affordability.
The logic is simple. Entry-level cars run on thin margins, and a 25% surcharge can erase the value proposition that made them entry-level in the first place. Volkswagen has been candid that it can’t simply swallow the added cost, leaving automakers, dealers and shoppers to figure out who absorbs what.
The Golf question
Tariff relief isn’t just about protecting today’s lineup — it could shape tomorrow’s. Volkswagen has signaled interest in returning the standard Golf hatchback to the U.S. market by sourcing it from Mexico, a move that would give the brand a third budget-friendly nameplate alongside the Jetta and Taos.
Right now, American buyers who want a Golf badge have only the hot-rod versions: the GTI at around $36,000 and the track-honed Golf R north of $50,000, both shipped in from Germany. A Mexico-built base Golf would slot well below those, and Gruner has suggested that building the car in North America could open the door to additional Golf variants down the road.
The catch, again, is the border tax. Gruner has been clear that import duties will heavily influence which Golf models — if any — actually make the trip to U.S. dealers.
Chattanooga becomes the center of gravity
While Volkswagen lobbies on trade, it’s also voting with its factories. Increasingly, the company’s U.S. future runs through Chattanooga, Tennessee, where VW has built vehicles since 2011. The plant currently turns out the ID.4 electric SUV plus the gas-powered Atlas and Atlas Cross Sport.