Definition of Trade Balance

What does the term "trade balance" mean? What is the definition of the term "trade balance"?

In order to calculate a country's trade balance, simply take the total value of its exports and subtract from this the total value of its imports.

Trade Balance = Exports - Imports

Another phrase sometimes used instead of "trade balance" is "net exports".

If a country imports more than it exports (for instance, the United States), then the country is said to have a "balance of trade deficit".

If a country exports more than it imports (for instance, China), then the country is said to have a "balance of trade surplus".

Economists have varying opinions as to whether it is "bad" for a country to have a trade deficit or a trade surplus.

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