What is the meaning of imports and exports? (With examples)

By Indeed Editorial Team

Published 7 April 2022

The Indeed Editorial Team comprises a diverse and talented team of writers, researchers and subject matter experts equipped with Indeed's data and insights to deliver useful tips to help guide your career journey.

Imports and exports are crucial indicators of a country's economic health. Countries use information from imports and exports to evaluate whether they have an excess or a shortfall. Understanding how imports and exports operate helps you whether you work in transportation, economics or a government role that requires handling shipments between other countries. In this article, we provide the meaning of imports and exports, examine how they affect an economy and list key differences between imports and exports.

What is the meaning of imports and exports?

The meaning of imports and exports is reasonably simple. Imports are products and services a company or client purchases from another country. While most nations attempt to export more products and services than they import to raise domestic income, a high level of imports might suggest that the economy is thriving.

This is particularly true if the imports are mostly productive assets, such as tools and machinery, because the receiving country often utilises these assets to boost the productivity of its economy. Exports are products and services that a country produces nationally and sells to enterprises or customers in other countries. As a result, the country selling products and services receives an infusion of revenue. Companies opt to export their goods and services to another nation to participate in global commerce, get access to new markets and boost income.

Example of an import

A paper manufacturing firm in the United Kingdom decides to import a new device from Italy. This is because it is less expensive than developing the equipment or obtaining it from a national provider. This boosts the manufacturing company's ability to make paper products, improving income and the opportunity to export more items in the future.

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Example of an export

Exporters create items at a reduced financial cost. Colombia, for instance, has a better environment than some other countries for growing coffee beans. Farmers in Colombia produce and sell coffee beans to other countries as an export. Buyers in other counties pay higher export prices for coffee beans because it's cheaper to cultivate them in Colombia.

The importance of imports and exports

Imports and exports contribute to a country's trade balance, which can influence the general health of the economy. Imports and exports both develop steadily in a healthy economy. This typically denotes a stable and healthy economy. If there is a higher number of exports, the country has a trade surplus. This implies a net influx of local money from international markets. A trade surplus usually suggests that the economy is doing well. When a country's imports exceed its exports, it has a trade imbalance. This indicates a net outflow of local money to international markets.

How does a country increase its exports?

Countries use currency reserves to control liquidity. As a consequence, they better regulate inflation. To keep inflation under control, they buy their currency using foreign cash. As a result, the money supply shrinks, increasing the value of the local currency. Occasionally, countries increase exports by devaluating their currencies. As a result, their export prices in the recipient countries are lower. A government also increases the value of a currency by printing more of it or purchasing foreign money.

How do imports and exports impact the economy?

To properly comprehend the importance of import and export in economics, it is useful to grasp how they affect a country's GDP, exchange rate, interest rates and degree of inflation. Below is some additional information on each of these topics and the ways they impact the economy:

1. GDP

The GDP of a country, often known as its national income, is the gross market value of all commodities and services the country produces over a certain period. GDP is one of the most commonly used indicators for tracking a country's overall economic health. This is because it helps assess whether an economy is rising or undergoing a recession.

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2. Exchange rates

The phrase exchange rate means the present value of one country's currency in relation to the value of another country's currency. The exchange rate of a country and its imports and exports are inextricably linked. If a country's local currency is weak, it boosts exports while making imports more expensive. If a country has a strong native currency, the country possibly sees a decline in exports.

3. Interest rates and degree of inflation

The term inflation means the rate of increase in chosen products and services over a given period. Inflationary pressures often lead to increased interest rates. This leads to a rise in imports and a decline in exports since purchasing goods from other nations becomes more cost-efficient than purchasing things locally.

Differences between imports and exports

While both are important for economies, there are major differences between importing and exporting. The following are some of the key differences between these activities:

1. Objective

Importing's major goal is to meet the need for services and items that are not accessible in a country. As previously stated, the importing country lacks the resources or ability to produce specific commodities effectively or at all. Companies also import services or goods from overseas markets if they are difficult or expensive to get at home. The major goal of exporting is to produce cash by selling domestic products to international markets. Companies also use exporting to increase their worldwide presence or to sell an excess of goods.

2. Impact on business

Companies import products or services to reduce production or operational expenses. A car company, for example, has the option to import parts to assemble its vehicles. Purchasing parts is often more cost-effective than manufacturing them. Businesses that import products order big quantities of goods and obtain them at a discount. After lowering these expenditures, the company offers items at a higher profit margin.

3. Impact on GDP

As mentioned above, a country's GDP is the total monetary worth of all the services and goods it generates during a certain period. When a country exports goods, it sells them to other countries' governments, enterprises, or customers. These exports provide revenue for the exporting country, enhancing its GDP. When a country imports goods, it buys them from foreign producers and businesses. The money spent abroad leaves the economy of the importing country, possibly lowering its GDP.

What careers work with imports and exports?

Working with imports and exports opens up a whole range of job prospects. Large corporations that manufacture things such as machines, technologies, cars and mineral fuels often conduct import-export trade. Here are some jobs that frequently include imports and exports:

  • Air export coordinator: An air export coordinator is in charge of all administrative activities associated with shipping things by air. They arrange and complete documentation such as invoices and customs declarations.

  • Supply chain manager: A supply chain manager is in charge of overseeing all stages of manufacturing, from procuring raw materials to delivering the finished product. They plan the transportation of goods from distribution hubs to customers and businesses.

  • Marine export coordinator: A marine export coordinator, like an air export coordinator, coordinates the administrative processes associated with shipping items overseas. They arrange and complete documentation such as invoices and customs declarations.

  • Operations manager: An operations manager is in charge of a company's operations and manufacturing. They're also responsible for the company's production machinery, making strategic choices on its behalf and submitting records in accordance with existing rules and regulations.

  • International trade compliance manager: An international trade compliance manager ensures that the business for which they work abides by all international rules and regulations governing imports and exports. They are professionals in international and local trade and logistics.

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How do imports and exports impact you?

When a country imports products, it indicates a capital outflow from that country. Local businesses are importers, and they make payments to foreign organisations or exporters. Imports at a high level reflect strong domestic demand and a developing economy. If these imports are mostly productive assets, such as industrial machinery, this is even better for a country because productive assets increase the economy's production in the long term.

A strong economy is one in which both imports and exports are increasing. This usually signifies economic strength and a long-term trade surplus or shortfall. If exports are increasing and imports are down, it implies that foreign economies are doing better than the home economy. If exports decline substantially while imports rise, it signals that the home economy is doing better than international markets.

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