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A '''trade deficit''' occurs when the value of a country's imports of goods and services exceeds the value of its exports over a given period. It is the opposite of a [[Trade Surplus|trade surplus]].<ref name="wiki">Wikipedia contributors, "Balance of trade".</ref>

== Definition ==

The trade balance is the difference between exports and imports:

::'''Trade balance = Exports − Imports'''

When this difference is negative, the country has a trade deficit. The trade deficit contributes to the [[Current Account|current account]] of the [[balance of payments]].<ref name="wiki"/>

== Causes ==

A trade deficit may arise from:

* Strong domestic demand for imported goods.
* An overvalued [[exchange rate]], which makes imports cheaper and exports more expensive.
* Low domestic saving relative to investment, which requires capital inflows from abroad.
* Structural factors, such as dependence on imported energy or raw materials.

== Implications ==

{| class="wikitable"
! Aspect
! Effect
|-
| Financing
| A deficit must be financed by foreign borrowing or asset sales.
|-
| Currency
| Deficits tend to weaken demand for the domestic currency.
|-
| Sustainability
| Persistent deficits may raise concerns about external debt sustainability.
|-
A trade deficit is not inherently harmful. It can reflect strong investment and growth, financed by willing foreign lenders, or it can reflect weak competitiveness and excessive consumption. The key question is whether the deficit is sustainable and how it is financed.<ref name="wiki"/>
|}
== See also ==

* [[Trade Surplus]]
* [[Current Account]]
* [[Balance of Payments]]
* [[Foreign Exchange Reserves]]

== References ==

<references />

[[Category:Economics]]
[[Category:International trade]]
[[Category:Balance of payments]]