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Balance of trade definition
Balance of trade is the difference between the value of a country's exports and the value of its imports over a set period. It is one of the main measures of how a country trades with the rest of the world.
Balance of trade is found by subtracting total imports from total exports. A trade surplus occurs when exports are worth more than imports. A trade deficit occurs when imports are worth more than exports. The figure is published on a regular schedule and feeds into the wider current account.
Balance of trade differs from the balance of payments: balance of trade covers only goods and services traded, while the balance of payments records every cross-border flow, including investment and transfers. Traders watch trade data because a shift in exports or imports can move a currency, government bond yields, and stock market expectations.
Balance of trade Example
A country exports USD 500 billion in goods and services and imports USD 450 billion over the same period.
The balance of trade is exports minus imports:
USD 500 billion - USD 450 billion = USD 50 billion
The country runs a USD 50 billion trade surplus, because its exports outweigh its imports.
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