What does a trade deficit indicate about a country's trade balance?

A trade deficit occurs when a country imports more goods and services than it exports. This situation indicates that the country's trade balance is negative because the value of imports exceeds the value of exports.

Having a trade deficit can suggest several economic conditions, such as increased consumer demand for foreign goods, reliance on foreign production, or perhaps a competitive disadvantage in certain industries. A persistent trade deficit may also raise concerns about the sustainability of a country's economic health in terms of foreign debt and currency values, but fundamentally, it reflects that imports surpass exports.

Other options, such as having an equal trade balance or exporting more than importing, directly contradict the definition of a trade deficit. Trading exclusively with one partner does not inherently indicate a trade deficit, as either surplus or deficit could result from such a setup depending on the trade values with that sole partner.