Terms of trade is the price of a country’s exports relative to its imports. The commodity terms of trade refers to a country’s commodity exports relative to its commodity imports.
When the price of commodities, like oil, plummeted in 2015, economies that rely on exporting commodities had their terms of trade drop by an average of about 10 percent of GDP that year. Economies that rely more on importing commodities saw about a 2 percent of GDP benefit from the 2015 drop in prices. (more…)