Volkswagen Proposes $10B U.S. Investment for Tariff Exemptions Amid 27.5% Duty Pressure

Volkswagen Group CEO Oliver Blume has proposed a $10 billion investment in the United States to secure tariff exemptions from the Trump administration, aiming to offset the company’s $1.4 billion in U.S. import duties for the second quarter of 2025. The proposal, outlined after the automaker revised its 2025 guidance downward, hinges on a reciprocal agreement where each dollar invested would reduce Volkswagen’s tariff liability by a comparable amount. Blume emphasized the need for direct bilateral negotiations with the White House once the Trump-EU trade deal is finalized, as this would clarify the exact tariff rates applicable to European exports to the U.S. market [1].

The strategy underscores Volkswagen’s strategic pivot to counteract the financial strain caused by existing tariffs. The 27.5% duty on vehicles and parts has eroded the company’s operating margin, with current forecasts projecting a 4% profit margin if tariffs remain unchanged. This represents a significant drop from its previous guidance of 5.5% to 6.5%, which assumes lower tariffs of 10% [1]. The automaker has already committed $2 billion to a new South Carolina plant for electrified vehicles under its Scout brand, though it did not confirm whether this investment is part of the $10 billion offer [1].

Critics, including Kiel Institute trade expert Julian Hinz, warn that such bilateral deals could destabilize the rules-based trading system. By enabling corporations to negotiate individual exemptions, the approach risks creating a fragmented and unpredictable trade environment. Hinz noted that the World Trade Organization’s dispute resolution mechanisms have been weakened since 2019, when Trump and Biden administrations blocked appointments to the Appellate Body, leaving no formal process to challenge U.S. tariff policies. This legal vacuum has emboldened the White House to leverage national security claims—such as its assertion that foreign car imports threaten U.S. manufacturing—to justify unilateral tariff adjustments [1].

Volkswagen’s request reflects a broader trend among global automakers to mitigate the impact of U.S. tariffs. The company’s tariff bill surged to €1.2 billion in the second quarter of 2025, far exceeding its first-quarter payment of €100 million and surpassing Detroit rivals’ $1.1 billion in the same period. While the Trump administration has not yet commented on the proposal, its willingness to engage in corporate-specific negotiations could set a precedent for other manufacturers to follow suit [1].

The potential success of Volkswagen’s offer depends on the Trump administration’s appetite for large-scale foreign investments in the U.S. auto sector. If accepted, the deal could align with broader efforts to revive domestic manufacturing but would also challenge the integrity of international trade norms. For Volkswagen, the stakes are high: a favorable outcome could reduce its tariff burden and secure a stronger foothold in the U.S. market, while failure may force the company to scale back its electrification ambitions or absorb higher costs that could dampen profitability [1].

Source: [1] [title: Volkswagen seeks audience with Trump, dangling more than $10 billion in U.S. investments in exchange for tariff exemptions] [url: https://fortune.com/2025/07/25/volkswagen-trump-tariffs-exemptions/]