A country that sells more to the world than it buys from it runs a trade surplus. One that buys more than it sells runs a deficit. The balance of trade is simply that gap, calculated by subtracting the value of imports from the value of exports over a given period, usually a month or a year.

Figures come from customs records, which log the movement of physical goods across borders. Services, like banking or tourism, are counted separately, so the headline trade balance often misses a big part of what a modern economy actually sells. A deficit is not automatically bad. The United States has run one for decades while growing steadily. A surplus is not automatically good either. A country can export heavily while its citizens struggle with low wages and poor living standards.

What moves the number

• Exchange rates: a weaker currency makes exports cheaper abroad and imports pricier at home.
• Domestic demand: fast growth pulls in foreign goods, widening a deficit.
• Competitiveness: productivity and quality decide whether domestic firms can win foreign buyers.
• Trade policy: tariffs, quotas, and trade deals reshape the flow of goods.