---
title: "Favorable Balance of Trade — AP Euro Definition & Guide"
description: "A favorable balance of trade means exporting more than you import. It's the core goal of mercantilism in AP Euro Unit 3 and drove colonies, tariffs, and the slave trade."
canonical: "https://fiveable.me/ap-euro/key-terms/favorable-balance-of-trade"
type: "key-term"
subject: "AP European History"
---

# Favorable Balance of Trade — AP Euro Definition & Guide

## Definition

A favorable balance of trade occurs when a country exports more goods and services than it imports, resulting in a surplus. This concept is crucial in understanding the economic strategies of nations, particularly during the era of mercantilism, where states aimed to maximize exports while minimizing imports to increase national wealth and power.

## Review

### Related Terms

- [Mercantilism](/ap-euro/key-terms/mercantilism): An economic theory prevalent in the 16th to 18th centuries that emphasized the role of the state in managing international trade to enhance national power, focusing on accumulating wealth through a favorable balance of trade.
- Tariffs: Taxes imposed on imported goods, used by governments to discourage imports and protect domestic industries, thereby contributing to a favorable balance of trade.
- Trade Surplus: The amount by which the value of a country's exports exceeds the value of its imports, synonymous with a favorable balance of trade.

### Key Facts

- During the mercantilist period, countries believed that a favorable balance of trade was essential for accumulating gold and silver, which were viewed as the primary indicators of wealth.
- Nations employed various strategies such as tariffs and subsidies to protect their domestic industries and encourage exports, leading to a favorable balance of trade.
- A favorable balance of trade can strengthen a nation's currency and improve its international creditworthiness, making it easier to borrow money for future investments.
- While mercantilist policies focused on achieving a favorable balance of trade, critics argued that such practices could lead to trade wars and limit overall economic growth.
- The concept of a favorable balance of trade has evolved; today, economists recognize that trade imbalances can be normal in a global economy and not necessarily harmful.

### How did mercantilism shape the policies aimed at achieving a favorable balance of trade?

Mercantilism significantly influenced national policies by promoting the idea that wealth was best accumulated through a favorable balance of trade. Governments implemented protectionist measures like tariffs and export incentives to ensure that their nations sold more goods abroad than they bought from foreign markets. This approach aimed to enhance national power and control over resources, fundamentally shaping economic practices during this period.

### Evaluate the economic impacts of tariffs on achieving a favorable balance of trade.

Tariffs were essential tools used by governments to create a favorable balance of trade by making imported goods more expensive. This encouraged consumers to buy domestic products instead, which helped local industries thrive. However, while tariffs could protect domestic markets and increase exports, they also risked retaliatory measures from trading partners, potentially leading to reduced overall trade and economic conflicts.

### Analyze how the modern understanding of trade balances differs from mercantilist beliefs about achieving a favorable balance of trade.

Today’s understanding recognizes that while a favorable balance of trade can benefit economies, persistent imbalances are not inherently detrimental. Unlike mercantilists who viewed surplus as necessary for national strength, modern economists argue that deficits can reflect healthy investments in growth or consumer demand. The focus has shifted from strictly managing exports versus imports to considering overall economic conditions and global interdependencies, highlighting the complexity of international trade relationships.