Imports and Exports

Net trade with foreigners: exports less imports. A trade deficit means that exports are insufficient to pay for exports; a trade surplus, the opposite.

Sometimes called "net exports", the trade balance is a component of GDP, to the effect that a perfectly equilibrated trade balance makes the GDP dependent only on domestic values (consumption, public expenditure, investments).

A simultaneous increase of both imports and exports by the same amount leaves unaltered the trade balance. Any difference in dynamics between exports and imports has a multiplied effect on trade balance.

Composition - Trade balance is usually decomposed by product and by country (bilateral trade balances). Relevant is the degree of concentration of the imbalance in trade caused by one or few commodities. If concentration is high, a targeted industrial policy could improve the balance (e.g. reduce the imbalance).

On the other hand, if a deficit is due only to few partners, proactive and consensus-based trade negotiations with them could fairly quickly set the problem.

Although less general than trade balance, which includes both goods and services, the "merchandise balance", which includes only goods and not services, is sometime used because of better data availability.