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.
10 Car Accessories You’ll Actually Use
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.
It’s about to get busier. Volkswagen plans to build hybrid versions of the Atlas and Atlas Cross Sport in Chattanooga, a deliberate choice to localize the components that matter most under current trade rules — the battery, the gearbox and the software that ties a hybrid powertrain together. The Tiguan hybrid, by contrast, is expected to come from Mexico.
Gruner hasn’t hidden his impatience on electrified powertrains, essentially saying he’d take the hybrids immediately if he could. The holdup is engineering, not enthusiasm: rebuilding a vehicle around a U.S.-sourced hybrid system and rewriting its software takes time, even when the market is hungry.
A bigger U.S. footprint in the works
Volkswagen’s American buildout extends beyond Tennessee. The group is constructing a roughly $2 billion plant near Columbia, South Carolina, to revive the rugged Scout nameplate as a line of electric off-roaders — a clear bet that VW can carve out space in a segment dominated by domestic brands.
The ambition has limits, though. Parent-company chief Oliver Blume has stepped back from an earlier goal of capturing 10% of the U.S. market, framing growth instead as a series of incremental gains. Volkswagen Group held around 4% of American sales last year, and tariffs have stung the balance sheet — the company has tied billions in costs to the duties over the course of 2025.
Plans for a dedicated Audi assembly plant in the U.S., once floated as a way to dodge European tariffs, have reportedly been paused as the economics shifted. Audi still leans on Mexico for models like the Q5, which doesn’t qualify for duty-free entry — another reminder of how tangled the trade picture has become for an automaker with a global supply chain.
The bottom line
Volkswagen’s U.S. strategy in 2026 is a two-track effort: press for lower tariffs on the Mexico-built cars that anchor its affordable lineup, while pouring investment into American plants to insulate the rest of the range. Whether shoppers ultimately get a cheaper Golf — or pay more for a Jetta — may come down less to Wolfsburg’s product planners than to the next round of trade negotiations in Washington.