What are imports and exports

What do imports and exports mean? Imports and exports definitions refer to two separate processes that form international trade.

Imports and exports play a key role in a country’s economy, and have a strong impact on gross domestic product (GDP), key interest rate, inflation levels and currency exchange rate.

In today’s globalised world international trade gives consumers access to a wide range of goods and services in their day-to-day lives, most of them are imported. Let’s take a closer look at the two terms separately.

Imports and exports explained

Imports are goods or services purchased in one’s own country that have been produced or manufactured in another country. 

Imports are a crucial part of international trade, and ensure the availability of particular goods and services when the domestic market doesn’t offer the same products. 

Exports are goods and services manufactured or produced in the native country and then sold, or exported, to consumers in other countries. 

Exports are critical for a country’s economy as they boost sales and profits of the 

manufacturers and producers if they establish a strong foothold overseas. 

How do imports and exports work?

When a country’s imports are greater than its exports, the country is said to have a negative balance of trade, or a trade deficit. This results in the net outflow of a country’s home currency, as imported goods are bought for a foreign currency.

Trade deficit = Value of imports > Value of exports

On the other hand, whe a country’s exports surpass its imports, the country is said to have a positive balance of trade, or a trade surplus. 

Trade surplus = Value of imports < Value of exports

This results in the net inflow of a country’s home currency as the exported goods and services are bought in that currency. Export growth can therefore boost the home currency.