What is meant by a 'trade deficit' ?

Key Points

• A trade deficit occurs when a country's imports exceed its exports.
• This means the country is buying more goods and services from other countries than it is selling to them.
• A trade deficit can impact a country's economy, affecting factors such as currency value, employment, and economic growth.
• While a trade deficit can indicate strong domestic demand and economic growth, it can also lead to increased foreign debt.

Additional Information

• A trade deficit is often measured as part of a country's current account, which also includes earnings on investments and transfer payments.
• Trade deficits can be influenced by factors such as exchange rates, economic policies, and the relative strength of economies.
• Some economists argue that persistent trade deficits can lead to a decline in the value of the national currency, while others believe they are not inherently problematic.
• Addressing a trade deficit may involve measures such as promoting exports, implementing tariffs, or adjusting currency values.