Balance of trade

Balance of trade figures, also called net exports (NX), are the sum of the money gained by a given economy by selling exports, minus the cost of buying imports. They form part of the balance of payments, which also includes other transactions such as the international investment position.

Popular myths of trade deficits

Very few issues in economics are misunderstood by the politicians and the public as much as the trade deficit. The metaphor of trade as some kind of battle, where surplus countries win and deficit countries lose, ignores the observation that trade is based on regional specialization. The long term theoretical push is toward equilibrium, for trade deficits and surpluses can only exist when there is an excess or lack of demand for a country's investment assets.

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