What is the trade balance?

The trade balance is fundamentally defined as the difference between a country's exports and imports. When a country exports more goods and services than it imports, it is said to have a trade surplus. Conversely, when imports exceed exports, it results in a trade deficit. Understanding the trade balance is crucial as it reflects a country's economic health and international competitiveness. A positive trade balance can strengthen a country's currency and indicate a robust economy, while a negative balance may have implications for the country's financial stability and debt levels. The significance of the trade balance extends beyond mere numbers; it influences domestic production, employment levels, and overall economic growth.