Trade deficit / surplus & its relation to the state of the economy?

Question

If a country is in a period of economic trouble, is it more likely to have a trade deficit (imports more that exports) or a trade surplus (vice versa)

your help appreciated

richard

Answer 1

Your question is a little vague. Usually if a country is in "economic trouble" it is more likely that it's GDP growth has either slowed or it is in recession (a negative GDP growth of 2 quarters or more).  

It is possible then the country's GDP growth is slowed, stalled or in decline that the country may have to import because it's not producing enough of a particular good, in which case can lead to a situation of a trade deficit.

But then again, if the country's in "economic trouble" which can result in job losses etc. then its people may not have the disposable income to be buying imports, unless the overseas produced good is a cheaper substitute to what can be purchased locally.  

Trade deficit/surplus also depends on the country's currency value. If the value is low then it can buy less imports for the same currency amount.

So many factors influence the balance of trade that one can't really generalise and say that a country's economic woes will necessarily mean either a trade surplus/deficit.

Hope that helps . . . or have I confused you even more?