What does "trade deficit" mean?

A trade deficit occurs when a country imports more goods and services than it exports. This situation indicates that the country's spending on foreign-made products exceeds the income it earns from selling its own products to other nations. In essence, a trade deficit reflects a net outflow of domestic currency to foreign markets because the country is purchasing goods and services from other countries more than it is selling to them.

This concept is essential in understanding international trade dynamics, as a persistent trade deficit can influence a country's currency value, its foreign debt levels, and overall economic health. Addressing a trade deficit may involve adjusting trade policies, improving domestic production, or fostering more competitive exports.

The other choices refer to different aspects of trade: exporting more than importing describes a trade surplus, a balance between imports and exports signifies a balanced trade situation, and the overall trade balance encompasses both surpluses and deficits, but does not specify a trade deficit.