What is a Trade Deficit?
A trade deficit occurs when a country imports more goods and services than it exports, creating a negative trade balance. In contrast, exporting more than is imported results in a trade surplus. Learn more about how global tariffs impact trade here .
What do trade deficits have to do with tariffs?
Often a government who imposes tariffs on imported goods will cite trade deficit as one of the reasons for doing so. It could be that the government sees a large and long-standing deficit with a particular trade partner as evidence that their trade relationship is unfair, or at least imbalanced. It could be that the trade deficit prompts a government to impose tariffs in order to protect domestic industriesโalthough some domestic businesses may actually depend on imported parts or goods, and so they too can end up being financially impacted by the tariffs.
How do trade deficits impact global businesses?
Trade deficits can have a generally positive impact on importers, as they indicate demand for imported goods and services in that country. However, as we mentioned above, trade deficits can prompt governments to impose tariffs in order to boost domestic industriesโand this can lead to an increase in costs for exporters, importers, the end consumer, or a combination of them all.โฏ
Weโll be following the global trade news closely, so look out for more articles explaining some of the key terms in the story.
Disclaimer
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The information in this document is intended to be of a general nature and does not constitute legal advice. While we have endeavored to ensure that the information is up to date and correct, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability or suitability of the information. In no event will we be liable for any loss or damage including without limitation, indirect or consequential loss or damage, or any loss or damage whatsoever incurred in connection with the information provided.
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