what are net exports 
net exports are a measure of a nation s total trade the formula for net exports is a simple one the value of a nation s total export goods and services minus the value of all the goods and services it imports equals its net exports a nation that has positive net exports enjoys a trade surplus while negative net exports indicate that the nation has a trade deficit a nation s net exports are thus a component of its overall balance of trade understanding net exportsa country that enjoys net exports brings in more money from goods and services sold overseas than it spends on importing goods and services exports include all the goods and other services a country sends to the rest of the world including merchandise freight transportation tourism communication and financial services companies export products and services for a variety of reasons exports can increase sales and profits if the goods create new markets or expand existing ones at best they present an opportunity to capture significant global market share companies that export also spread business risk by diversifying into multiple markets exporting into foreign markets also reduces per unit costs by expanding operations to meet increased demand finally companies that export to foreign markets gain new knowledge and experience that may lead to the discovery of new technologies and marketing practices and insights into foreign competitors if a nation s currency is weak in relation to other currencies the goods available for export become more competitive in international markets as their prices are relatively less expensive to the retail customer that encourages positive net exports if a country s currency is strong its exports are more expensive consumers will pass them up for cheaper local products which can lead to negative net exports formula and calculation of net exportsthe formula for determining a nation s net export number is a simple one net exports value of total exports value of total importsthe details are more complicated the u s census bureau for example tracks the nation s exports and imports of industrial supplies and materials capital goods consumer goods food automotives and automotive parts and more it also tracks the numbers by trading partner the u s has its biggest trade deficit not surprisingly with china and that deficit increased by 31 6 billion in 2022 to 382 9 billion 1the u s trade deficit as a percentage of gdp for 2022 that is a slight increase from 3 6 of gdp in 2021 1net exporter vs net importercountries produce goods based on the resources and skilled labor capacity that they have available when a country cannot produce a particular product efficiently but still wants or needs it its businesses can buy it from other countries that produce and export it a net exporter is a country that sells more goods to foreign countries than it brings in from abroad saudi arabia and canada are examples of net exporting countries both have an abundance of oil which they sell to businesses in other countries that need it a net exporter by definition runs a current account surplus in aggregate a net importer by contrast is a country or territory whose value of imported goods and services is higher than its exported goods and services over a given period of time by definition a net importer runs a current account deficit the united states is a net importer purchasing many of its consumer products and raw materials from countries like china and india because those nations can produce them more cheaply a country may run either deficits or surpluses with individual countries or territories depending on the types of goods and services that it buys and sells the competitiveness of these goods and services current exchange rates levels of government spending and trade barriers a country can be a net exporter of some categories of goods while being a net importer of other products for example japan is a net exporter of electronic devices but it must import oil from other countries to meet its needs some economists believe that running a consistent trade deficit harms a nation s economy by giving domestic producers an incentive to relocate overseas creating pressure to devalue the nation s currency and forcing its interest rates lower yet the united states has both the world s largest deficit and its largest gross domestic product gdp that suggests that running a trade deficit is not always detrimental the world s most prolific exportersaccording to world bank data the most prolific exporter by the percentage of gross domestic product gdp in 2021 for which the latest data is available was luxembourg at 211 4 if you don t recall buying any products made in luxembourg lately you should know that its main trading partners are germany france and belgium and it exports many products including steel and machinery diamonds chemicals and food 2other leading export countries in recent years include the countries that exported the least as a share of gdp in 2020 included burundi at 5 sudan at 2 3 guam at 3 and nepal at 5 2 2examples of countries with net export deficits and surplusesto find examples of how nations calculate net exports we first have to see the world bank data on the imports side for the same year for example ireland s imports came in at 95 as a percentage of gdp in 2021 while luxembourg s imports totaled 176 7 by subtracting those figures from the exports of these nations we find that ireland had net exports of 39 4 in 2019 while luxembourg enjoyed net exports of 34 7 3for 2021 the latest year in the world bank s report the u s had net exports totaling 10 9 of gdp while it had net imports of 14 6 of gdp the u s had a trade deficit of 3 7 of gdp separately u s census bureau figures set the u s deficit at 3 7 in 2021 and 3 8 in 2022 factors influencing net exportsfor a country to be a net exporter it must have products or raw materials that overseas buyers desire and the capacity to deliver them at a cost that is low enough to entice foreign consumers to import them rather than buying a domestic alternative a country exports when it has a comparative advantage in a product or an ability to produce a particular product or service at a lower opportunity cost than its trading partners some countries enjoy an absolute advantage in certain products particularly in raw materials or natural resources these will be in high demand as exports saudi arabia has a natural advantage in its oil reserves the u s is rich in coal and timber among other resources china is rich in rare earth minerals a country s currency exchange rate also plays an important role if a currency loses value relative to its potential trading partners its companies can produce and sell those goods abroad relatively cheaply the reverse is true if the nation s currency value rises because of this a country s government or central bank of an exporting country may employ monetary policy tools if the currency starts to rise in global markets a third important factor is the government s export tax policies trade barriers such as quotas tariffs and other taxes are designed to stifle international trade and encourage domestic production a trade barrier is any government regulation that is designed to protect domestic products from foreign competition or artificially stimulate exports of particular domestic products the most common foreign trade barriers are government policies that restrict prevent or impede the international exchange of goods and services the greater the trade barriers both at home and internationally the harder it is to export net exports and gdpthe net exports number is a key component of a nation s gdp it either adds to gdp if it is a positive number or decreases its gdp if it is a negative number a high gdp or at least a gdp that is growing from year to year is seen as an indicator of a nation s economic health a negative net exports number detracts from that number that does not by any means end the debate over whether a trade deficit is a bad mark against a nation s economy one way to look at a trade deficit is to see it as an indication that a nation s citizens can consume more than they produce they have the money to buy the goods and services that they cannot produce themselves on the other side there is a political hazard ahead for nations running big deficits the nation is sending its money abroad and leaving itself vulnerable to economic colonization 