What Is an Unfavorable Balance of Trade?

An unfavorable balance of trade is a trade deficit, which occurs when the value of an economy's imports exceeds the value of its exports over a certain period. A favorable balance of trade is a trade surplus, which occurs when an economy exports more than it imports.

Balance of trade is a method used to evaluate an economy’s trade interests. The leading economic theory of 18th century Europe considered a trade surplus necessary for an economy to operate successfully. However, modern economists have discovered that a deficit or surplus actually benefits foreign trade as long as the amount of trade is increased.