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In macroeconomics, balance of trade is one of the leading economic metrics that determines the trading relationship of a country with the rest of world. Balance of trade is computed as the differences between the value of exports and imports of goods and services over a particular period and is typically measured in domestic currency. According to the data from the U.S. Census Bureau, the United States had the largest annual trade deficit in 2006 and the U.S. balance of trade stood at $761.7 billion.

Balance of Trade

Trade balance, or net exports, represents a relationship between a country's exports and imports and is one of the four components of the gross domestic product, or GDP, calculated according to the expenditure method. A positive balance for the balance of trade is called trade surplus and indicates a country sells more goods and services overseas than it imports from the rest of the world. A negative balance represents a trade deficit and usually means the country must borrow funds to finance such a trade gap.

U.S. Trade Deficit

Beginning from around the late 1990s, the U.S. began to consistently run high trade deficits that reached their maximum in 2006 due to large imports of goods and service from abroad that far exceeded the U.S. exports, contributing to the decrease in the GDP figure. The imported goods and services that contributed most to the widening U.S. trade gap were industrial supplies and materials, consumer goods, capital goods, fuel, machinery and petroleum. This is a result of net inflow of capital to the U.S from abroad since U.S. residents do not save enough to finance investment opportunities in the U.S.

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