Understanding trade balances
Trade policy discourse on both sides of the Atlantic has recently focused on trade deficits and surpluses. In the United States (US), President Donald Trump has routinely referred to the US trade deficit as a central indicator of the country's economic woes and made its reduction a key objective of US trade policy. In Europe, the world's largest trade surplus, run by Germany, has come under scrutiny. However, focusing on trade balances of exports and imports can be misleading in the trade policy context. Trade balances need to be considered as an integral part of a larger whole, the balance of payments of an economy. The imposition of specific trade policy measures, such as unilateral tariffs, cannot be expected to improve a trade balance significantly.
At a Glance
About this document
Publication type
Author
Policy area
Keyword
- America
- common commercial policy
- economic geography
- ECONOMICS
- Europe
- export (EU)
- FINANCE
- GEOGRAPHY
- Germany
- gross domestic product
- import (EU)
- international affairs
- INTERNATIONAL RELATIONS
- international trade
- liberalisation of trade
- monetary relations
- national accounts
- political geography
- trade
- TRADE
- trade balance
- trade policy
- trade policy
- transatlantic relations
- United States