Trade Credit Letter of Credit Magazine Section

BALANCE OF TRADE

Balance of Trade is the difference between the value of goods and services that are exported out of a country and the value of goods and services imported into the country.
Balance of Trade = (Value of goods and services Exported from the country) - (Value of goods and services Imported into the country)
A 'Surplus' means that a country Exported more goods and services than it Imported. This is generally deemed favourable.
A 'Deficit' means that Imports exceeded Exports in value. This is generally deemed unfavourable.
Balance of Trade is further split into two components: Balance of Merchandise Trade (for tangible goods) and Balance of Services (for services).

Balance of Trade is included in a country's overall Balance of Payments. This is because Balance of Payments includes all financial transactions made between the government, businesses and individuals of a country with others.
Definition from the Concise Encyclopedia of Economics: The Balance of Payments accounts of a country record the payments and receipts of the residents of the country in their transactions with residents of other countries. If all transactions are included, the payments and receipts of each country are, and must be, equal. Any apparent inequality simply leaves one country acquiring assets in the others.
Therefore, Balance of Trade is the official term for Net Exports that makes up the Balance of Payments of a country.

Balance of Trade for different countries: Link courtesy of Trading Economics

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