US Import Tariff Threatens To Produce Volkswagen's Largest Factory In Mexico

Volkswagen SUV in Mexico. (Doc. X/@Volkswagen_MX)

JAKARTA - President of the United States (US) Donald Trump has ordered new tariffs on goods from Mexico, Canada and China. The new tariff policy in question is the imposition of tariffs of 25 percent for imported goods from Canada and Mexico, as well as an additional 10 percent tariff for goods from China. This policy is planned to take effect on Tuesday, February 4.

For this policy, it raises concerns among the automotive industry. The German automotive association, VDA, for example, stated that this tariff is a significant setback for regulatory-based global trade and could have an impact on employment in Germany and Europe.

Meanwhile, as reported by Reuters on Monday, February 3, German auto giant Volkswagen, is anxiously awaiting negotiations regarding the new import rate policy implemented by the United States. This policy has the potential to cause significant trade conflicts. Volkswagen's factory in Puebla, Mexico, which is one of their largest factories, is in the spotlight.

The Puebla plant plays an important role in Volkswagen's global production. In 2023, the plant managed to produce nearly 350.000 units of cars, including popular models such as Jetta, Tiguan, and Taos. All production results from the plant are aimed at exporting to the United States, making it very vulnerable to changing trade policy.

"We are evaluating the potential impact of the tariffs announced on our automotive industry and our company," an official statement from Volkswagen said.

"We expect constructive negotiations between trading partners to ensure certainty of economic planning and stability, as well as avoid trade conflicts," Volkswagen added.

Volkswagen itself is the German automaker most exposed to this tariff policy. Analysts from investment bank Stifel predict that 65 percent of Volkswagen's cars sold in the United States will no longer be competitive if import rates are applied to products from Mexico. This situation put Volkswagen in a difficult position and demanded them to take strategic steps to address existing challenges.