Speaking of import and export trade, I believe everyone will be familiar with it. After all, every country has import and export trade, and some countries rely heavily on import and export trade. It is precisely because some countries rely on import and export trade. The appearance of trade balance and imbalance is the so-called trade balance. Maybe everyone has a better understanding of trade balance, that is, the total value of exports is equal to the total value of imports. This may be called a trade balance in economics, but the trade imbalance is different. The situation is more complicated. It is related to trade deficit and trade surplus, so what does trade deficit mean? Is the trade deficit good or the surplus good? Next, I will briefly talk about what does the trade deficit mean? Whether the trade deficit is good or the surplus is good.
The meaning of trade deficit and surplus
Nowadays, many countries have import and export trade, each country’s import and export trade balance is different, most countries are in a state of trade imbalance, and trade imbalance is divided into trade deficit and trade surplus
The trade surplus is the symmetry of the trade deficit, also known as the export surplus (the import surplus), which refers to a country or region whose total value of goods exported to foreign countries exceeds that of imported goods in a certain period of time (usually a year) The total value of.
The trade deficit, also known as “inward surplus”, is a symmetry of “extra surplus”. It means that the total value of goods imported by a country from abroad exceeds the total value of goods exported to foreign countries in a certain period of time (usually a year).
In fact, the trade deficit means that the total value of imports is larger than the total value of exports, and there is a trade deficit. This situation is called a trade deficit in economics. To put it simply, in a certain unit of time, both sides of the trade conduct import and export trade with each other. If the export amount of one side is larger than the export amount of the other side, or the export amount of one side is larger than the export amount of the other side, then the amount is small. The party with the largest amount is the trade deficit, and the party with the larger amount is the trade surplus.
Favorable Balance 0f Trade. The so-called trade surplus means that a country’s total export trade is greater than its total import trade in a given year, also known as “extra”. It means that the country’s foreign trade was in a favorable position that year. The size of the trade surplus largely reflects a country’s foreign trade activities in a particular year. Under normal circumstances, it is not appropriate for a country to have a large foreign trade surplus for a long period of time, because such a move can easily cause friction with relevant trading partners. For example, one of the main reasons for the fluctuations in the bilateral relations between the United States and Japan is that Japan has been in a huge surplus for a long time. At the same time, a large foreign exchange surplus usually leads to an increase in the amount of domestic currency in a country’s market, which is likely to cause inflationary pressure and is not conducive to the sustained and healthy development of the national economy.
Is the trade surplus good or the deficit good?
For a country, a large trade surplus is not necessarily a good thing, because the higher the trade surplus, the more dangerous it is. For the country, it may mean that economic growth is too dependent on foreign countries. The trade surplus may be detrimental to the country’s economic development, especially when foreign exchange reserves are excessive, it may cause a certain amount of idle and waste of funds, which is very detrimental to economic development. Once the reserve currency exchange rate drops, then foreign exchange reserves will inevitably suffer a certain loss. For a country, an increase in foreign exchange reserves will inevitably increase the issuance of local currency, which is very likely to cause inflation, or even Caused the forced appreciation of the national currency, leading to a disadvantaged position in export trade.
In foreign trade, the total export value is greater than the total import value, which is called a surplus, which is also called an excess. The total amount of imports is greater than the total amount of exports, which is called a deficit or an excess. If the total amount of imports and exports are equal, it is called a trade balance. In general, the trade surplus reflects that a country is in a favorable position in the balance of foreign trade, indicating that it is in an advantage in the commodity competition in the world market; otherwise, it is in a disadvantageous position and disadvantage. But excessive exports are not necessarily beneficial. The increase in exports, if production cannot be expanded accordingly, will inevitably inhibit the satisfaction of domestic demand and affect the material and cultural needs of the people of the country. Therefore, although the surplus is good, the key is to control it to the extent that it does not affect domestic demand and can create foreign exchange reserves for the country. If the foreign exchange reserves are high, in the event of emergencies (such as wars, natural disasters, etc.), they can respond as quickly as possible to avoid deterioration of the situation and cause greater losses.
A larger trade surplus is not necessarily good. An excessively high trade surplus is a dangerous thing, which means that the growth of the domestic economy is more dependent on external demand than at any time in the past few years, and the external dependence is too high. The huge trade surplus has also brought about the expansion of foreign exchange reserves, which has put greater pressure on the currency to appreciate, and has also given the international trade protectionist forces a reason to believe that the huge surplus reflects that the currency is undervalued. This has increased the pressure of currency appreciation and financial risks, and has increased the cost and difficulty of the reform of the currency exchange rate mechanism. The simpler countermeasure is to stimulate domestic consumption.
When a country has a trade deficit, it means that the country’s foreign exchange reserves are reduced, the international competitiveness of its commodities is weakened, and the country’s foreign trade is at a disadvantage during the period. A large trade deficit will aggravate the outflow of domestic resources and increase foreign debt, which will affect the normal and effective operation of the national economy. Therefore, the government should try to avoid a long-term trade deficit.
Therefore, whether it is a trade surplus or a trade deficit, it is not a good thing. Only trade equilibrium is the best state. After all, equilibrium is also a very important concept in economics. Those who want to do trade may wish to learn more about this aspect. know how.