Definition
It represents a negative balance in trade for a given period.
Political Dictionary
Trade Deficit
A trade deficit occurs when a country imports more goods and services than it exports.
Why It Matters
It reflects patterns in saving, investment, exchange rates, income, and international demand.
How It Works
Statistical agencies compare the value of exports with imports.
History
Trade deficits became more prominent in public debate as global commerce expanded.
Example
If imports total $1 trillion more than exports, the trade deficit is $1 trillion.
Common Misconceptions
- A trade deficit means the country is losing that amount of wealth.
- It is caused only by tariffs.
- A country with a deficit exports nothing.
Related Terms
- Fiscal Policy
- Monetary Policy
- Inflation
- Economic Growth
- Government Spending
Related Topics
See Also