DEFINITION OF ‘BALANCED TRADE’
A condition in which an economy runs neither a trade surplus or a trade deficit. Under a balanced trade scheme between two countries, each country will agree to purchase as many goods as it sells to the other. A country looking to achieve balanced trade may use tariffs or barriers to trade to ensure that other countries purchase its goods.
BREAKING DOWN ‘BALANCED TRADE’
A balanced trade model is different than a free trade model, in which countries utilize their resources and comparative advantages to buy or sell as many goods and services as demand and supply allows. Achieving balanced trade may be difficult for countries that take part in international trade organizations, such as the World Trade Organization (WTO), as these organizations typically limit tariffs and trade barriers.