Trade Deficit
A trade deficit occurs when a country’s imports exceed its exports during a specific period.
Meaning in Practice
A trade deficit indicates that domestic demand for foreign goods and services surpasses external demand for domestic products. It is calculated as imports minus exports. The data is published regularly as part of trade statistics.
Why It Matters
Persistent trade deficits may signal competitiveness challenges or strong domestic consumption. They can increase reliance on foreign capital inflows. Policymakers evaluate deficits within the broader balance of payments framework.
Market Impact
A widening trade deficit can weaken the domestic currency and affect investor sentiment. It may influence bond yields depending on financing conditions. Equity markets respond based on growth and sectoral exposure.
Example
If imports total 600 billion while exports amount to 550 billion, the country records a trade deficit of 50 billion.