Trade Deficit

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DEFINITION of 'Trade Deficit'

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Current Account Deficit

    A measurement of a country’s trade in which the value of goods ...
  2. Balance Of Payments (BOP)

    A record of all transactions made between one particular country ...
  3. Deficit Hawk

    Slang for someone who wants the government to keep the federal ...
  4. Bilateral Trade

    The exchange of goods between two countries. Bilateral trade ...
  5. Foreign Debt

    An outstanding loan that one country owes to another country ...
  6. Debtor Nation

    A nation with a cumulative balance of payments deficit. A debtor ...
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