Business, Legal & Accounting Glossary
A trade deficit is when imports exceed exports.
Knowing the size of a country’s trade deficit tells us something fundamental (and seemingly simple). It is selling fewer goods and services to people outside its borders than it is buying from foreign countries. It’s more complex than counting (and bemoaning) the number of Japanese-produced Walkmans (remember those?) on Maple Street, U.S.A. Not everyone considers having a trade deficit bad; more just a product of economic cycles.
A trade deficit has to be looked at by sector and by country to understand what it says about a specific country’s economy.
For instance, all else being equal:
It’s also important to consider trade deficits on a country-to-country basis:
Having a trade deficit is not necessarily a bad thing. It may indicate growing wealth within a country if its citizens suddenly want and can afford lots of foreign goods. On the other side of this, if other countries aren’t wealthy, they can’t afford U.S. goods.
Information on the U.S. trade deficit can be found at the website of the Department of Commerce’s Bureau of Economic Analysis.
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This glossary post was last updated: 6th August, 2021 | 1 Views.