TREND OF THE PHILIPPINES TRADE DATA WITH RESPECT TO ANNUAL TRADE DEFICIT MEANING OF TRADE DEFICIT AND ITS IMPLICATIONS Trade Deficit is a term used to denote the negative gap between the Imports and Exports made by a country in one fiscal year. In simple terms, when the value of total imports becomes larger than the value of total exports, then the situation of Trade Deficit arises where the outflow of money becomes more than the inflow. There are two main and biggest reasons why a country faces a trade deficit. One, when a particular nation is not able to produce every good domestically, then in order to fulfill the demands of its citizens, the nation tends to import a variety of goods from different countries and pay import taxes. Secondly, when most of the companies of a nation are in the manufacturing business and are set up abroad, importing the finished products from them incurs a huge cost that escalates the trade deficit even more. IMPACT OF TRADE DEFICIT ON COUNTRY AND ITS CITIZENS There are various impacts connected with trade deficits on a country. They are as follows: • At the beginning stage, the people of the nation enjoy high living standards as they get access to every product. • If the situation of trade deficit gets longer, then it affects the currency of that nation and weakens it. • Outsourcing of jobs abroad takes place. • As the trade deficit grows, the demand for domestic products gets reduced and it impacts the local manufacturers and sellers.
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