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Finance: What is Balance of Trade? 14 Views

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What is Balance of Trade? Balance of trade is just the difference between imports and exports in a country. When imports outweigh exports, there is a deficit. When exports outweigh imports, there is a surplus. Typically, deficits are bad and surpluses are good.

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Transcript

00:00
Finance a la shmoop... what is balance of trade...up, down, up, down yeah all right [Squirrels riding a see-saw]
00:10
think of balance of trade the same way you would think of that seesaw in your
00:14
schoolyard instead of the big-boned third-grader
00:17
weighing in against the you know waiting to grow kindergartner when it comes to [Ship sailing out of harbor]
00:21
international economies and the goods they buy and sell from into each other

00:25
we have exports this guy and imports this guy if two countries have a balance
00:30
in trade well then the financial weight on this seesaw thing here is even the
00:35
three future NFL linemen weigh about the same as eleven future tax auditors yeah [Linemen players and tax auditors in a see-saw]
00:41
but that's rarely the case when countries trade among each other
00:45
and if you're on the seesaw you want to be heavy like fat with feet firmly
00:50
planted on the ground where you are exporting or selling to another country [Goods travelling to foreign countries]
00:54
a whole lot more stuff than you're importing what you want is to be
00:58
collecting boatloads of their currency or oil or velcro kilts from Scotland and
01:04
as you capture more and more of their trade or wealth [Wealth sucked into the US]
01:08
the powerful imbalanced one well that'd be you here you get to have more and
01:13
more influence on them and the world they live in is there a way to gain this
01:18
system cheat? well sorta yeah politicians and governments get very nervous when
01:23
the balance of trade is not in their favor and they have the ability to pile [Imports and exports pile on a see-saw]
01:26
a bunch of books on their side of the seesaw to help their skinny accountants
01:31
compete better how do they do this magic you ask okay yeah we know you didn't ask
01:35
but we'll tell you anyway they smack a tax on goods they import from you like
01:41
the US government in the middle of our loss of dominion over the auto industry [Auto industry logos land in a seesaw]
01:45
to Japan and Korea and Germany well we placed a big fat tax on foreign cars
01:50
being imported into the US and we still lost the war there so yeah the seesaw ie
01:56
the balance of trade isn't always fair and by the way if you ever see this guy
02:00
coming run at least feed him [Man running in a park]
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