terms of trade: meaning, definition, pronunciation and examples
C2Formal, Academic, Technical (Economics/Finance)
Quick answer
What does “terms of trade” mean?
The ratio between a country's export prices and its import prices.
Audio
Pronunciation
Definition
Meaning and Definition
The ratio between a country's export prices and its import prices.
An economic indicator measuring the relative value of a nation's exports to imports, reflecting its purchasing power in international markets. A favorable (improving) ratio means export prices are rising relative to import prices, while an unfavorable (deteriorating) ratio means the opposite.
Dialectal Variation
British vs American Usage
Differences
No significant lexical difference. UK English may show a slight preference for 'favourable/unfavourable' spelling.
Connotations
Identical technical connotations. May appear slightly more frequently in UK media/economics discourse due to historical focus on trade balances.
Frequency
Low frequency in general discourse, but standard and equally frequent in technical economic contexts in both varieties.
Grammar
How to Use “terms of trade” in a Sentence
The terms of trade [verb: improved/deteriorated].A country's terms of trade are [adjective: favorable].to calculate/measure the terms of trade for [country/region]Vocabulary
Collocations
Examples
Examples of “terms of trade” in a Sentence
verb
British English
- The nation's terms of trade have deteriorated sharply.
- We need to analyse how the terms of trade are moving.
American English
- The country's terms of trade improved last quarter.
- Economists project the terms of trade will worsen.
adjective
British English
- favourable terms-of-trade effects
- an unfavourable terms-of-trade shock
American English
- favorable terms-of-trade adjustment
- the adverse terms-of-trade movement
Usage
Meaning in Context
Business
Used in reports and analysis of international market positions: 'Our country's deteriorating terms of trade are squeezing corporate profits on exported goods.'
Academic
Core concept in international economics: 'The Prebisch-Singer hypothesis concerns the long-term deterioration of terms of trade for primary commodity exporters.'
Everyday
Rare. Might appear in high-quality news: 'Rising oil prices have improved the terms of trade for exporting nations like Norway.'
Technical
Precise, quantified calculation: 'The commodity terms of trade index rose from 102 to 107 last quarter.'
Vocabulary
Synonyms of “terms of trade”
Strong
Neutral
Weak
Vocabulary
Antonyms of “terms of trade”
Watch out
Common Mistakes When Using “terms of trade”
- Using singular 'term of trade'. *INCORRECT*.
- Confusing it with 'balance of trade' or 'trade balance'.
- Using it in non-economic contexts (e.g., 'the terms of trade in our negotiation...').
FAQ
Frequently Asked Questions
It is always treated as plural. You say 'The terms of trade ARE improving,' not 'is improving.'
Terms of trade is a PRICE ratio (export prices/import prices). Trade balance is a VALUE difference (total export value minus total import value). You can have a trade deficit but improving terms of trade if export prices rise faster than import prices, but you're simply not exporting enough volume.
Almost never. It is a macroeconomic indicator applied to countries or large economic regions.
It means export prices are, on average, 10% higher relative to import prices compared to the chosen base year (index = 100). This indicates an improvement or favorable movement.
The ratio between a country's export prices and its import prices.
Terms of trade is usually formal, academic, technical (economics/finance) in register.
Terms of trade: in British English it is pronounced /ˌtɜːmz əv ˈtreɪd/, and in American English it is pronounced /ˌtɝːmz əv ˈtreɪd/. Tap the audio buttons above to hear it.
Phrases
Idioms & Phrases
- “to trade on favorable/favourable terms”
Learning
Memory Aids
Mnemonic
Think of it as the PRICE TAG of trade. What you SELL (exports) vs. what you BUY (imports). If your sell price goes up relative to your buy price, you get more for your money.
Conceptual Metaphor
TRADE IS AN EXCHANGE OF VALUE (measured by a ratio or scale).
Practice
Quiz
What does 'deteriorating terms of trade' signify for a country?