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Volkswagen and BMW Respond to U.S. Tariff Policies with Long-Term Strategies

Automakers face challenges from new trade rules as Volkswagen explores backup plans and BMW opts to absorb costs temporarily.

Volkswagen vehicles are seen, on the day of the annual Volkswagen Group press conference in Wolfsburg, Germany March 11, 2025. REUTERS/Liesa Johannssen
An employee works on a Volkswagen vehicle at its factory in Puebla, Mexico
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Overview

  • Volkswagen and BMW are adjusting strategies to navigate U.S. tariffs on vehicles imported from Mexico, with Volkswagen ruling out immediate production shifts to the U.S.
  • President Trump granted a one-month exemption for USMCA-compliant vehicles, set to expire on April 4, but automakers face uncertainty about long-term trade policies.
  • Volkswagen's Puebla, Mexico plant, responsible for two-thirds of its U.S. sales, is central to its operations, but increasing U.S. production in Chattanooga will require more time.
  • BMW has decided not to pass on the cost of tariffs to U.S. customers for now, contrasting with other automakers considering price hikes to offset the financial impact.
  • Volkswagen is developing long-term contingency plans while continuing a cost-cutting initiative, including headcount reductions and factory adjustments, to improve profitability.