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What is 'Trade Deficit'

Trade deficit is an economic measure of a negative balance of trade in which a country's imports exceeds its exports. A trade deficit represents an outflow of domestic currency to foreign markets.

BREAKING DOWN 'Trade Deficit'

Economic theory dictates that a trade deficit is not necessarily a bad situation because it often corrects itself over time. However, a deficit has been reported and growing in the United States for the past few decades, which has some economists worried. This means that large amounts of the U.S. dollar are being held by foreign nations, which may decide to sell at any time. A large increase in dollar sales can drive the value of the currency down, making it more costly to purchase imports.

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RELATED FAQS
  1. What is the difference between a current account deficit and a trade deficit?

    Learn the meanings of the macroeconomic terms current account deficit and trade deficit, and understand the differences between ... Read Answer >>
  2. What happens to the US dollar during a trade deficit?

    Learn what happens to the U.S. dollar during trade deficits. Trade deficits happen when imports exceed exports leading foreigners ... Read Answer >>
  3. Why do some analysts argue that trade deficits aren't bad for the economy?

    Understand the reasons why trade deficits, reviled by many economic analysts, are not always a bad thing in the eyes of many ... Read Answer >>
  4. At what level is the current account deficit considered excessive, in terms of percent?

    Take a deeper look at the variables that impact current account deficits, and learn why not all types of deficits have equal ... Read Answer >>
  5. Is a current account deficit good or bad for the economy?

    Take a deeper look at the nature of a country's current account balance, and see why trade deficits are neither good nor ... Read Answer >>
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    A trade deficit, which is also referred to as net exports, is an economic condition that occurs when a country is importing ... Read Answer >>
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