Trade deficit vs trade surplus
About this video
The balance of trade is the difference between a country's exports and imports. Using 2023 trade between China and the United States ($427.2 billion of Chinese goods to the US and $147.8 billion of US goods to China), the video shows that China ran a $279.4 billion trade surplus with the US, which is the same as a $279.4 billion US trade deficit with China.
You'll be able to
- define balance of trade, trade surplus and trade deficit.
- calculate the balance of trade between two countries.
- explain why one country's surplus is the other country's deficit.
Key words
- balance of trade
- The difference between the value of a country's exports and its imports.
- exports
- Goods a country sells to other countries.
- imports
- Goods a country buys from other countries.
- trade surplus
- When a country's exports are larger than its imports.
- trade deficit
- When a country's imports are larger than its exports.
Transcript
- [Instructor] So the balance of trade, generally speaking, is the difference between a country's imports and exports. And to help make that clear, let's think about the balance of trade between China and the United States. So, I just looked up the information.
This is the information for 2023, and it turns out that we had $427.2 billion worth of goods. And in order to calculate a balance of trade, you have to denominate it in some currency and dollars is what's most often used. So, $427 billion of goods got exported from China and imported into the United States.
And the United States did export some goods to China, but that was a smaller number. This is $147 billion. 147.8 billion. So, let's think about the balance of trade for each of these countries with respect to the other one. So if we think about China, its exports are much larger than its imports relative to the United States.
So relative to the United States, it is running a trade surplus. Why is this a surplus? Because your exports are larger than your imports. We could be talking about the balance of trade, generally, all of the exports to all countries and all of the imports from all countries.
Or you could be talking about the balance of trade with another partner, with another country. And in this case, we are focusing on the United States. How much is their trade surplus? Well, if you subtract 147.8 billion from 427.2 billion, you have a difference of $279.4 billion trade surplus.
Now, what about if you viewed it from the point of view of the United States? Well, from the point of view of the United States, we are running a trade deficit because in this situation, our imports with China at least, are greater than our exports. And what is the size of our trade deficit?
Well, once again, it is 279.4 billion. From the American point of view, it is a deficit. From the Chinese point of view, it is a surplus.
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