#shereYourTread Trade refers to the voluntary exchange of goods or services between economic actors.

Since transactions are consensual, trade is generally considered to benefit both parties.

In finance, trading refers to purchasing and selling securities or other assets.

In international trade, the comparative advantage theory states that trade benefits all parties.

Most classical economists advocate for free trade, but some development economists believe protectionism has advantages.

Investopedia / Nez Riaz

How Trade Works

As a generic term, trade can refer to any voluntary exchange, from selling baseball cards between collectors to multimillion-dollar contracts between companies.

In macroeconomics, trade usually refers to international trade, the system of exports and imports that connects the global economy. A product sold to the global market is an export, and a product bought from the global market is an import. Exports can account for a significant source of wealth for well-connected economies.

International trade results in increased efficiency and allows countries to benefit from foreign direct investment (FDI) by businesses in other countries. FDI can bring foreign currency and expertise into a country, raising local employment and skill levels. For investors, FDI offers company expansion and growth, eventually leading to higher revenues.

A trade deficit is a situation where a country spends more on aggregate imports from abroad than it earns from its aggregate exports. A trade deficit represents an outflow of domestic currency to foreign markets. This may also be referred to as a negative balance of trade (BOT).

$28.5 trillion

The total value of the global trading market, according to the United Nations Conference on Trade and Development.1

International Trade

International trade occurs when countries put goods and services on the international market and trade with each other. Without trade between different countries, many modern amenities people expect to have would not be available.