Trade Balance

If a country exports more than it imports, it has a trade surplus. If it imports more than it exports, it has a trade deficit.

For example, if a country exports goods and services worth 500 billion in a year and imports 560 billion, it has a trade deficit of 60 billion.

A trade deficit is not automatically bad. It may reflect strong consumer demand, a growing economy or the fact that a country is investing heavily and importing equipment. Some countries run deficits for long periods while prospering. A trade surplus is not automatically good either; it can reflect weak domestic demand.

The trade balance is influenced by exchange rates, economic growth at home and abroad, competitiveness and trade policies. A weaker currency makes exports cheaper for foreign buyers and imports more expensive, which tends to improve the trade balance over time.

The trade balance is the largest part of the current account, which also includes income from foreign investments and transfers.

Note: The balance of trade means the same as the trade balance. Some sources use "balance of trade" for goods only and "trade balance" for goods and services, so it is worth checking which is meant.