That's potentially a lot more serious than just a paint chip.
I'm no dentist, but the same holds true for tooth decay and rust. If you don't get it all, it will continue to fester away underneath whatever repair is made. So, you need to rub/grind down to bare metal so that you see NO rust. I had a similar looking spot on my front hood, and by the time I was done I had ground complete holes in the leading edge of the hood. The metal was impregnated with rust all the way through, because the rust originated from the rear and the damage was complete by the time you saw it from the front.
I hope yours is different, but be prepared that the rust started from the back of the tailgate.
I also had a Jeep windscreen surround in the same bad state of repair. I fixed both in the same way:-
- Remove all rust
- Apply rust remover of your choice
- Patched the hole with metal epoxy; sanded until super smooth. you can, and would typically, use Bondo....but I needed the extra strength and support of the metal epoxy. Plus, it sands downs beautifully smooth, which is the whole idea of Bondo too. Bondo is a better option for larger repairs where the panel cannot be replaced.
- Prime
- Paint
- Apply rust inhibitor to the back of the repair. I used WaxOyl but there are plenty of brands on the market.
If you just have surface rust then you use all the steps above with the exception of having to fill a hole with epoxy or some other method.
Here is the rusty Jeep windshield frame.
After cleaning and rust removal....
After patching with metal putty, but before prime and paint....
I have more pictures of the whole process, but these show the process in a nutshell.
It's been years since both of these repairs and rust has not come back on either due to good prep and the application of the rust inhibitor wax.
Good Luck..!!