where exports represents the currency value of all goods and services exported to foreign countries and imports represents the currency value of all goods and services imported from foreign countries 
here s an example of how to calculate the balance of trade let s say that a country s export in a given year are worth 100 million and its imports are worth 80 million to calculate the balance of trade you would subtract the value of the imports from the value of the exports balance of trade exports imports 100 million 80 million 20 millionin this example the balance of trade is 20 million which means that the country has a trade surplus of 20 million it s important to note that the balance of trade is typically measured in the currency of the country whose trade balance is being calculated for example if the country in the above example is the united states the balance of trade would be measured in us dollars if the country is japan it would be measured in japanese yen and so on examples of balance of tradethe united states imported 324 6 billion in goods and services in january 2024 and exported 257 2 billion in goods and services to other countries in january 2024 the united states had a trade balance of 67 4 billion or a 67 4 billion trade deficit 1a trade deficit is not a recent occurrence in the united states in fact the country has had a persistent trade deficit since the 1970s throughout most of the 19th century the country also had a trade deficit between 1800 and 1870 the united states ran a trade deficit for all but three years 2for its january february 2024 period china reported a trade surplus of 125 16 billion this was significantly higher than forecasted amounts and much greater than the december 2023 trade surplus of 75 3 billion 3balance of trade surplus vs deficita numerically positive balance of trade also known as a trade surplus occurs when a country s exports are worth more than its imports this is measured in their total value using the country s currency a trade surplus can be a result of a country having a competitive advantage in the production and export of certain goods or it can be the result of a country s currency being relatively undervalued making its exports cheaper for foreign buyers on the other hand a numerically negative balance of trade also known as a trade deficit occurs when a country imports more goods and services than it exports in terms of their total value in the country s currency this means that the country is spending more on imports than it is earning from exports while it may be a cause for concern in some instances often it s not a problem it is also not an indication of economic crisis or weakness a trade deficit can be the result of a country having a comparative disadvantage in the production of certain goods or it can be the result of a country s currency being relatively overvalued making its imports cheaper and its exports more expensive in general a trade surplus is seen as a positive sign for a country s economy while a trade deficit is often seen as a negative sign however this is not always the case a trade surplus or trade deficit is not inherently good nor bad the balance of trade alone is not an indicator of economic health the context of the balance of trade is very important it s necessary to look at why a trade deficit or surplus is occurring for example if imports fall faster than exports due to a recession killing demand that would be a situation in which a surplus can occur during a time of economic difficulty on the other hand exports could boom due to an increase in demand from a key trading partner an example of a trade surplus in positive times to access an economy s overall strength or weakness it s also necessary to look beyond the balance of trade at things such as inflation unemployment growth production and more special considerationsa country with a large trade deficit borrows money to pay for its goods and services while a country with a large trade surplus lends money to deficit countries a country may only be able to borrow a lot to run that deficit if it is deemed dependable and creditworthy the united states would be a great example of such a country on the other hand the less creditworthy a country the higher its borrowing costs will be and therefore its deficit will be more damaging a trade surplus or deficit is not always a viable indicator of an economy s health and it must be considered in the context of the business cycle and other economic indicators for example in a recession countries prefer to export more to create jobs and in turn more demand in the economy from those benefiting from the new jobs in times of economic expansion countries have a great appetite for imports and may use them to increase price competition which limits inflation balance of trade vs balance of paymentsthe balance of trade is the difference between a country s exports and imports of goods and services while the balance of payments is a record of all international economic transactions made by a country s residents including trade as well as financial capital and financial transfers the balance of trade is a part of the balance of payments and is represented in the current account which also includes income from investments and transfers such as foreign aid and gifts the capital account which is another part of the balance of payments includes financial capital and financial transfers it s important to note that the balance of trade and the balance of payments are not the same thing although they are related the balance of trade measures the flow of goods and services into and out of a country while the balance of payments measures all international transactions including trade in goods and services financial capital and financial transfers a country can have a positive balance of trade a trade surplus and a negative balance of payments a deficit if it is exporting more goods than it is importing but it is also losing financial capital or making financial transfers conversely a country can have a negative balance of trade a trade deficit and a positive balance of payments a surplus if it is importing more goods than it is exporting but it is also receiving a large amount of financial capital or receiving financial transfers 