What can result from a strong currency in terms of trade balance?

A strong currency can have a significant impact on a country's trade balance by making exports more expensive for foreign buyers. When a nation's currency appreciates, its goods and services become costlier in international markets, which can reduce demand from overseas customers. This can lead to a decline in export volumes, negatively affecting the overall trade balance.

Conversely, a strong currency often makes imports cheaper, allowing consumers and businesses to purchase foreign goods at lower prices. This increase in demand for imports can further exacerbate the trade imbalance, as the value of imports may rise while export revenues decrease. Hence, the net effect is typically a worsened trade balance, as the country may find itself importing much more than it is exporting due to the increased costs associated with its own products.