What does the balance of trade record?

The balance of trade is a crucial measure of a country's economic performance that specifically records the difference between the value of a nation's exports and the value of its imports of goods and services over a certain period. When exports exceed imports, a country experiences a trade surplus, while if imports exceed exports, it results in a trade deficit. This balance provides insights into the economic health of a country and can influence foreign exchange rates, economic policies, and overall economic growth.

Understanding the balance of trade is vital for gauging how competitive a country's economy is in the global market. It reflects the demand for a nation's goods and services abroad as well as the consumption of foreign products domestically. Consequently, it plays a significant role in formulating trade policies and economic strategies.