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Balance of Trade Deficit is an imbalance in a nation's balance of trade in which the payments for merchandise imports made by the country exceed payments for merchandise exports received by the country. This is also termed an unfavorable balance of trade. It's considered unfavorable because more goods are imported into the country than are exported out, meaning that domestic production is replaced with foreign production, which then reduces domestic employment and income. A balance of trade deficit is often the source of a balance of payments deficit.