Trade Surplus

What Is Trade Surplus?

A trade surplus occurs when a country exports more goods and services than it imports over a given period, giving it a positive balance of trade. It is the mirror image of a trade deficit. Like a deficit, a surplus is an accounting balance rather than a measure of economic success, though it is often portrayed as a sign of national strength. A country running a current account surplus is generally running a financial account deficit at the same time, meaning it is a net lender to, or investor in, the rest of the world. The United States runs a deficit in goods trade but typically records a surplus in services trade such as tourism, finance, and licensing.

Why It Matters

Surpluses are frequently celebrated by policymakers, but economists stress that a persistent surplus is not automatically better than a deficit. A surplus means a country is producing more than it consumes and lending the difference abroad, which can reflect high saving, weak domestic demand, or an undervalued currency rather than pure competitiveness. Large, sustained surpluses in some economies and matching deficits in others are sometimes described as global imbalances, and they can become a source of trade friction. Because one country's surplus must be another's deficit, the world as a whole cannot run a surplus, so surpluses and deficits are best read as information about saving, investment, and exchange rates rather than as a national scorecard.

Test Your Knowledge

Questions on this topic from the EconRecall fact bank:

• The United States has run a persistent deficit in GOODS trade for decades, while generally running what in SERVICES trade?
  A surplus
• The Wealth of Nations was written largely as an attack on which prevailing doctrine, which held that a nation grows rich by accumulating gold and silver through trade surpluses?
  Mercantilism
• What is deadweight loss?
  The loss of total surplus that occurs when a market does not trade at the efficient equilibrium quantity