In the last week, Volkswagen (VW), the German car giant, has admitted cheating emissions tests in the US. According to the Environmental Protection Agency (EPA), some cars being sold in America had devices in diesel engines that could detect when they were being tested, changing the performance accordingly to improve results. VW has had a major push to sell diesel cars in the US, backed by a huge marketing campaign trumpeting its cars' low emissions. The EPA's findings cover 586,000 cars in the US only, including the VW-manufactured Audi A5, and the VW brands Jetta, Beetle, Golf and Passat. But VW has admitted that about 9 million cars worldwide are fitted with the so-called "defeat device".
Assume that all these cars were produced in Germany. As result of this scandal, Americans have decided not to buy any cars manufactured by VW.
What is the impact of this decision on the US balance of trade (fully explain), and US current account (fully explain)?
In the last week, Volkswagen (VW), the German car giant, has admitted cheating emissions tests in the US. According to the Environmental Protection Agency (EPA), some cars being sold in America had devices in diesel engines that could detect when they were being tested, changing the performance accordingly to improve results. VW has had a major push to sell diesel cars in the US, backed by a huge marketing campaign trumpeting its cars' low emissions. The EPA's findings cover 586,000 cars in the US only, including the VW-manufactured Audi A5, and the VW brands Jetta, Beetle, Golf and Passat. But VW has admitted that about 9 million cars worldwide are fitted with the so-called "defeat device".
Assume that all these cars were produced in Germany. As result of this scandal, Americans have decided not to buy any cars manufactured by VW.
What is the impact of this decision on the US balance of trade (fully explain), and US current account (fully explain)?
