What does a trade surplus mean? Is a trade surplus or a trade deficit better?

In foreign trade, if you do not understand the meaning of trade terms, it will be difficult for the trade to proceed smoothly. The buyer will doubt your professionalism and your ability. So what does trade surplus mean?

1. What does a trade surplus mean?

A trade surplus is a phenomenon in which the total amount of exports of a region or a country in a certain period of time is greater than its total amount of imports. Conversely, when the total amount of imports is greater than its total amount of shipments, it is called a trade deficit.

A trade surplus means that the country's foreign trade is in a more advantageous position. Generally speaking, when a country's currency depreciates, it will cost the country more money to import foreign goods, while the cost of foreign imports from that country will decrease, which will lead to an increase in the country's exports and a decrease in imports.

A trade surplus will increase net exports and expand domestic demand, thereby stimulating economic growth. A trade surplus increases foreign exchange reserves, enhances comprehensive national strength, and is conducive to maintaining international credibility, improving foreign financing capabilities and the ability to attract foreign investment. However, too high a trade surplus is not good either, as it indicates that the country's external dependence is too high. At the same time, a huge trade surplus also leads to an expansion of foreign exchange reserves, which puts greater pressure on the appreciation of the domestic currency.

2. Is a trade surplus or a trade deficit better?

A larger trade surplus is not necessarily a good thing. An excessively high trade surplus is a dangerous thing, which means that the growth of the domestic economy is more dependent on external demand than at any time in the past few years, and the external dependence is too high. The huge trade surplus has also led to the expansion of foreign exchange reserves, which has brought greater appreciation pressure on the currency and given international trade protectionist forces an excuse to believe that the huge surplus reflects that the currency is undervalued. This has increased the pressure of currency appreciation and financial risks, and increased the cost and difficulty of the reform of the currency exchange rate mechanism. A relatively simple countermeasure to deal with trade surpluses is to boost domestic consumption.

To sum up, a trade surplus refers to the phenomenon that the total amount of exports of a region or a country in a certain period of time is greater than its total imports.