Definition of trade deficit or surplus

excess of imports over exports (trade deficit) or of exports over imports (trade surplus), resulting in a negative or positive balance of trade. The balance of trade is made up of transactions in merchandise and other movable goods and is only one factor comprising the larger current account (which includes services and tourism, transportation, and other invisible items, such as interest and profits earned abroad) in the overall balance of payments. Factors influencing a country's balance of trade include the strength or weakness of its currency in relation to those of the countries with which it trades (a strong U.S. dollar, for example, makes goods produced in other countries relatively cheap for Americans), production advantages in key manufacturing areas (Japanese automobiles, for instance), or the domestic economy of a trading country where production may or may not be meeting demand.