trade surplus

A trade surplus occurs when a country's exports exceed its imports. This means a nation sells more goods and services to other countries than it buys from them. It is also referred to as a favorable balance of trade.12

Conversely, a trade deficit happens when imports are greater than exports. Historically, mercantilism viewed a trade surplus as a sign of national wealth and power. However, modern economic theories suggest that a continuous surplus might indicate underutilized resources. Developing countries often face challenges in maintaining surpluses due to unfavorable terms of trade during economic downturns.32