Trade is the transfer of goods and services between individuals or companies in exchange for a payment. In the modern world, trading is often a result of the division of labor and specialization, where one company produces raw materials that are sold to another for production of finished goods. This practice is also called outsourcing.
Trade may be domestic or international. When it is between two countries, the country that sells the goods is known as the exporter and the country that buys them is known as the importer. Countries may place limits on the goods they will buy from other countries, such as a quota or tariff. These limits are designed to prevent countries from selling products that they do not produce themselves, or that are dangerous or illegal. They are also intended to keep companies from forming monopolies that limit competition and make them less profitable.
People have traded for generations. Prehistoric people traded items for things they needed that they could not produce themselves, such as obsidian for tools. They also traded items for services that they required, such as food, shelter and clothing.
Trade between countries occurs because different regions can have a comparative advantage in producing certain goods, such as energy and building supplies. In these cases, trade can be beneficial for both countries. Trade can also be harmful, however, when a country spends more on imports than it receives from exports. This situation is referred to as a trade deficit.