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Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Net Importer

What it is:

A net importer is a country that buys more from other countries than it sells to other countries. Often, countries are net importers in some industries (natural gas, for example) but net exporters in others.

How it works (Example):

Net imports are measured by comparing the value of the goods imported over a specific time period to the value of similar goods exported during that period. The formula for net imports is:

Net Imports = Value of Imports - Value of Exports

For example, let's suppose Canada sold $3 billion of gasoline to other countries last year, but it also bought $7 billion of gasoline from other countries last year. Using the formula above, Canada's net gasoline imports are:

Net Imports = $7 billion - $3 billion = $4 billion

In this example, Canada is a net importer of gasoline.

Why it Matters:

When the value of goods exported is higher than the value of goods imported (a net exporter), the country is said to have a positive balance of trade for the period. Conversely, a country that imports more goods than it exports (a net importer) has a negative balance of trade. When taken as a whole, this in turn can be an indicator of a country's savings rate, future exchange rates, and to some degree its self-sufficiency (though economists constantly debate the idea).

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