Trade is the buying and selling of goods or services between individuals, companies, or nations. This exchange is generally consensual and mutually beneficial. The term also refers to the financial market, where traders make investments based on expectations and knowledge of future trends in prices.

Trading began with ancient civilizations, as people bartered for items they needed and wanted. Today, trade is a vital component of most economies. It allows countries to specialize in producing goods they can produce efficiently and then exchange them for items that they cannot, based on the principle of comparative advantage. This allows consumers to access a wide variety of goods at lower prices and gives businesses incentives to improve their production processes.

However, not all trade is beneficial. A company that buys a cheaper foreign product to sell to its customers gains, but the domestic producer loses the sale. In addition, international trade can harm third world markets for local products by imposing tariffs or other barriers to entry.

Regardless, many believe that the benefits of trade outweigh the costs. For example, increased efficiency in production results in more products for a lower price, reducing consumer prices and boosting economic growth. It also leads to more innovation and faster investment spending, both of which promote sustainable long-term growth. This is a major reason why free trade is promoted by economists.