Trade Surplus

Loading the player...

What is a 'Trade Surplus'

A trade surplus is an economic measure of a positive balance of trade, where a country's exports exceeds its imports. A trade surplus represents a net inflow of domestic currency from foreign markets, and is the opposite of a trade deficit, which would represent a net outflow.

BREAKING DOWN 'Trade Surplus'

When a nation has a trade surplus, it has control over the majority of its own currency. This causes a reduction of risk for another nation selling this currency, which causes a drop in its value. When the currency loses value, it makes it more expensive to purchase imports, causing an even a greater imbalance.

Because a trade surplus usually creates a situation where the surplus only grows (due to the rise in the value of the nations currency making imports cheaper), there are many arguments against Milton Friedman's belief that trade imbalances will correct themselves naturally.

RELATED TERMS
  1. Surplus

    The amount of an asset or resource that exceeds the portion that ...
  2. Current Account Surplus

    A positive difference between a nation’s savings and investment. ...
  3. Budget Surplus

    A situation in which income exceeds expenditures. The term "budget ...
  4. Benchmark Surplus

    Benchmark surplus is an insurance term that refers to the amount ...
  5. Current Account

    The difference between a nation’s savings and its investment. ...
  6. Adjusted Surplus

    The surplus (assets minus liabilities) of an insurance company ...
Related Articles
  1. Economics

    Explaining Budget Surplus

    Budget surplus is an economic term describing a situation where revenue exceeds expenditures.
  2. Economics

    What's the Balance of Trade?

    The balance of trade is the difference between the value of all the goods and services a country exports and the goods and services it imports.
  3. Professionals

    Currency Appreciation and Depreciation

    CFA Level 1 - Foreign Exchange Parity Relations - Influences. Learn how budget deficits can lead to trade deficits and the various causes behind currency depreciation and appreciation.
  4. Economics

    The Balance Of Trade

    The balance of trade is the difference between a country’s imports and exports. A trade deficit occurs when a country buys or imports more goods from other countries than it sells or exports. ...
  5. Economics

    How Imports And Exports Affect You

    Imports are an important indicator of an economy’s health. In a healthy economy, exports and imports are both growing.
  6. Economics

    What does Current Account mean?

    The current account reflects the difference between a country’s savings and investments.
  7. Economics

    The Pros & Cons of a Trade Deficit

    Is a trade deficit, also known as a current account deficit, beneficial or detrimental to a country's economy?
  8. Economics

    Understanding Consumer Surplus

    Consumer surplus is an economic measure of consumer satisfaction, which is calculated by analyzing the difference between what consumers are willing to pay for a good or service, relative to ...
  9. Professionals

    International Economic Factors

    FINRA Series 6 Exam Study Guide - International Economic Factors. This section discusses international factors such as currency exchange rates, balance of trade (BOT) and Balance of Payments.
  10. Economics

    Interesting Facts About Imports And Exports

    Imports and exports exert a profound influence on the consumer and the economy. Learn what affects these figures, and in turn how these figures affect the economy.
RELATED FAQS
  1. What is the difference between consumer surplus and economic surplus?

    Learn the difference between consumer surplus and economic surplus, how the concepts are related and the important theoretical ... Read Answer >>
  2. For what purpose is the consumer surplus figure used?

    Understand who uses the consumer surplus figure and why it's used. Learn why companies want to minimize consumer surplus ... Read Answer >>
  3. What's does the current account have to do with the trade balance?

    Learn how a nation's trade balance is factored into its current account, and the differences between these two common terms. Read Answer >>
  4. Why are economists interested in the consumer surplus?

    Understand why an economist would be interested in consumer surplus. Learn why an economy would want to maximize consumer ... Read Answer >>
  5. What's the difference between economic value added (EVA) and producer surplus?

    Understand economic value added and producer surplus. Learn why companies focus on economic value added and producers focus ... Read Answer >>
  6. When has the United States run its largest trade deficits?

    Learn in what year the United States ran its largest negative balance of trade as a result of imports greatly exceeding the ... Read Answer >>
Hot Definitions
  1. Law Of Demand

    A microeconomic law that states that, all other factors being equal, as the price of a good or service increases, consumer ...
  2. Cost Of Debt

    The effective rate that a company pays on its current debt. This can be measured in either before- or after-tax returns; ...
  3. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  4. Stop-Limit Order

    An order placed with a broker that combines the features of stop order with those of a limit order. A stop-limit order will ...
  5. Keynesian Economics

    An economic theory of total spending in the economy and its effects on output and inflation. Keynesian economics was developed ...
  6. Society for Worldwide Interbank Financial Telecommunications ...

    A member-owned cooperative that provides safe and secure financial transactions for its members. Established in 1973, the ...
Trading Center