‘Terms of Trade’

Let us take an example to understand Terms of Trade
If a country is exporting only apples and importing only oranges, then the terms of trade (TOT) are simply the ratio of price of apples to the price of oranges. Suppose the price of apple is Rs. 120/kg and Oranges is Rs. 40/kg So, TOT = Export Price/Import Price =120/40 = 3

So, TOT of 3 means that we can import 3 units by exporting one unit.
Hence, TOT is a measure of how much imports an economy can get for a unit of exported goods.

So, TOT is not about ‘export value’/’import value‘ of a country, rather it is ‘export price’/’import price’. It does not matter whether a country is exporting more or less but it depends on the per unit price of exported item to that of price of imported item.

So, whatever be the TOT, if the price of imported commodities started increasing (like presently its crude oil), this means that  TOT will be negatively impacted for exporting country .