A trade deficit occurs when a country imports more goods and services than it exports. This means that the value of what it buys from other countries exceeds the value of what it sells abroad. A trade deficit can indicate a strong domestic demand for foreign products or a lack of competitiveness in certain industries. Countries with a trade deficit may finance the difference by borrowing or attracting foreign investment. While a trade deficit is not inherently negative, it can lead to concerns about economic stability and long-term growth if it persists over time.