The Balance Of Trade refers to the difference between the value of a country's imports and exports of goods and services. In other words, it measures the flow of goods and services between countries. The balance of trade reflects a country's international trade performance. A positive balance is known as a trade surplus. A negative balance is known as a trade deficit.When a country imports more goods and services than it exports, it must borrow money or sell assets to finance the difference. This is known as deficit spending. A deficit spending is also known as an external deficit. A country with external deficits has an external debt or external liabilities. The country with a positive balance of trade is known as a creditor, while the country with a negative balance of trade is known as a debtor.In simple terms, the Balance of Trade measures the difference between the value of imports and exports of goods and services. For example, if a country imports $100 worth of goods and services, but exports only $80 worth of goods and services, then that country has a trade deficit of $20.When the world's economy started to collapse in 2008, many countries around the world ran into deficits. In fact, many advanced economies like the United States and Western Europe ran into huge trade deficits as they started to buy more from China and other emerging economies. One of the biggest trade deficits in the world is run by the United States. The United States has a negative trade balance with China (the world's second largest economy) as it imports far more than it exports.A negative balance is known as a trade deficit. When a country imports more goods and services than it exports, it must borrow money or sell assets to finance the difference. This is known as deficit spending. A deficit spending is also known as an external deficit. A country with external deficits has an external debt or external liabilities. The country with a positive balance of trade is known as a creditor, while the country with a negative balance of trade is known as debtor.
