<p>Trade balance, a fundamental concept in macroeconomics, refers to the difference between a country's exports and imports of goods and services. It is a key indicator of a nation's economic health and international trade performance.</p>

<h2>How It Works</h2>
<p>The trade balance is calculated as:</p>
<p><strong>Exports - Imports = Trade Balance</strong></p>
<p>When exports exceed imports, the country records a trade surplus. Conversely, when imports exceed exports, the country experiences a trade deficit. A trade balance of zero indicates that a country's exports and imports are equal.</p>

<h2>Why It Matters</h2>
<p>The trade balance plays a crucial role in understanding a country's economic performance and international competitiveness. Here's why it matters:</p>
<ul>
  <li><strong>GDP Impact:</strong> Trade balance directly influences a country's Gross Domestic Product (GDP). A trade surplus contributes positively to GDP, while a trade deficit has a negative impact.</li>
  <li><strong>Currency Value:</strong> A persistent trade deficit can lead to a decrease in the value of a country's currency in the foreign exchange market, making imports more expensive and exports cheaper, which can help to correct the imbalance.</li>
  <li><strong>International Trade Agreements:</strong> Trade balances are often a key focus in international trade negotiations, as countries aim to reduce deficits and increase surpluses through agreements on tariffs, quotas, and other trade barriers.</li>
</ul>