Trade

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This article deals with the trade network and trade income. For information about trade goods and their production and value, see trade goods.
Trade nodes

Trade and production of trade goods are two of the three main sources of income for a country, the third being taxes. Every province produces trade goods, which give production income to their owner directly. The trade value of the goods then enters a system of trade nodes, where it is steered and eventually collected by Merchants as Trade Income.

Summary

Trade can be summarised simply:

  • The world is divided into a global network of trade nodes, which are grouped provinces.
  • Trade nodes are linked together to form unidirectional static routes. These routes are not changeable in the course of play.
  • Trade value represents ducats (money) in the network. It is produced in each province from production of trade goods, and all provinces contribute to their trade node's combined trade value.
  • Trade power represents each country's control over trade in a node, and influences where the node's trade value moves on to. Countries can help steer trade value along a route to any of its next nodes, or collect their share of the trade value at the node, thus earning money.
  • Light ships (i.e. a merchant fleet), trade buildings and certain ideas, events and modifiers can increase a country's trade power in a node.
  • The node in which a country's main trading port (usually its capital) is located is its capital node, and money is automatically collected there without any player input. 'Domestic trade power' refers to trade power in this node.
  • Foreign trade nodes, unlike a country's home node, require a merchant to steer or collect from. They can be tactically placed along a network to bring trade to your home node or to collect trade from afar. 'Trade power abroad' refers to trade power in these nodes.

Trade nodes

Main article: Trade nodes

The provinces of the world are grouped into regional, unchangeable trade nodes.

A trade node does not exist in a single province; it is the entire collection of its provinces. Every trade node has a predefined set of downstream nodes, where trade value will travel on to, if steered by merchants.

All trade value entering a trade node is either collected there or transferred on to a downstream trade node.

Network

Nodes can be classified relative to a country and other nodes as such:

  • Home node: The node that contains a country's main trade port.
Every nation will automatically collect trade income from the province that is its main trade port. At the beginning of the game, this is the same as its capital, but the main trade port can be moved (with WoN DLC) for 300Diplomatic power.png Collecting converts the country's share of the Trade Value directly into ducats. The amount of ducats produced is modified by the Trade Income modifier, which is itself modified by the Trade Efficiency modifier.
  • Upstream nodes: For a given node, all other nodes from which trade flows to that node are considered upstream.
If a country does not collect from a trade node but does collect from a neighbouring downstream node, the country's Trade Power there will by default pull trade forward. The forwarded Trade Value leaves the node as Outgoing Trade Value and is added to downstream nodes as Incoming Trade Value. The direction of the outgoing trade can only be controlled by merchants.
  • Downstream nodes: For a given node, all other nodes to which trade flows from that node are considered downstream.
20% of a country's Trade Power in a node is added to each immediately upstream node by default, provided the country already has Trade Power in that upstream node (as of patch 1.4 trade power propagates upstream into empty trade nodes as well, 20% of a country's Trade Power in a node is split evenly between all incoming nodes and propagates upstream and trade power below 2 doesn't propagate).

Trade value

See also: Trade goods

Trade value represents ducats (money) in the trade network.

All trade value first enters the trade system as local trade value. The local trade value of a node is the sum of the Trade Value of its provinces. On a provincial level, trade value is generated by its produced trade goods.

Trade power

Historical centers of trade. Legend: religious center toll river estuary center of trade other

Countries manipulate trade via Trade Power in each node, which affects where Trade Value ends up.

Trade Power can be used either to collect from a node or to steer trade downstream (forward). A country's share of local trade power equals its share of local trade value.

"i.e. share of local trade power means a country can collect or steer a larger share of the money in that node."

While the proportion of trade forwarded onward from a node is proportional to the trade power of all nations in a node, the direction the trade is steered is proportional to the trade power only of nations with merchants steering trade from that node. A nation with little power in a node will nonetheless completely determine the direction of outgoing trade if it is the only nation with a merchant present. If no Merchant is present at a node, outgoing trade is divided evenly between the outgoing links, except that no trade will be forwarded to an undiscovered node (for example, no unsteered trade will go from Mexico to Nippon until the Pacific route is explored).

Gaining trade power

A country's Trade Power in a trade node is determined by:

  • Provincial Trade Power: Every province contributes an amount of trade power to its owner's country in the local trade node. The base power is 1.0 for a non-coastal province and 1.5 for a coastal province. Certain provinces are designated as historical centers of trade or as river estuaries and have 5 to 20 bonus trade power. These are denoted by special icons visible on the trade map, and when selecting the province in question. Trade buildings increase trade power. Mercantilism provides a bonus to provincial trade power equal to double the listed mercantilism percentage. Provinces in trade companies get +50% trade power.
  • Light ships: Light ships increase trade power in the trade node to which they are protecting trade by a base of 3.0 per ship, which increases for more advanced models. Any admiral commanding a trade fleet will modify its trade power bonus, depending on his naval maneuver skill; a 5% bonus is granted per point of maneuver.
  • Merchants: Merchants increase trade power by 2.0 in the trade node to which they are sent. This is a token amount and not the main purpose of merchants. Merchants sent to landlocked trade nodes produce significantly more trade power when certain ideas and decisions are unlocked.
  • Capital provinces: A country's capital province gets +5 trade power in its home node.
  • Subject nations provide their overlord with a portion of their trade power, while other nations can be persuaded (through diplomacy) or forced (through war) to transfer some of their power as well.

Trade power is modified not only by any modifiers of that name, but also by half of a country's trade efficiency.

Protecting trade

Light ships on trade missions can only be sent to trade nodes where the country already has trade power and the supply ships reach is met. If the trade range permits a country can send a merchant to a node without any initial trade power and then follow up with light ships as long as these are supplied.

Merchants

Merchants are envoys used to alter the default trade route behavior by collecting or steering trade. Merchants must be stationed at a trade node to do their work and can only travel a distance defined by a country's Trade Range, which increases with diplomatic technology, idea groups, and national ideas.

Merchant actions

Merchants can be used to control Trade Routes in the following ways.

  • Collect from Main Node: The merchant will grant a 10% income bonus to income collected at a nation's main trading port. (Note that nations will automatically collect from their main node even if they do not have a merchant present.)
  • Collect from another node: This will allow a nation to collect trade income from the selected node. Collecting trade income from a non-main node halves the country's Trade Power in that node. (The listed penalty in the trade power tooltip is misleading. There is always a 50% penalty applied multiplicatively. However, the tooltip will list an additive penalty that is equivalent to a 50% multiplicative penalty. For example, if a nation has a +140% trade power modifier before the collecting penalty, the listed penalty will be 70%, since 140% - ( 140% * 50%) = 140% - 70% = 70%.)
  • Steer Trade: This allows the country to influence the steering of outgoing trade along a particular outgoing link. Note that only Merchants can steer trade---countries without Merchants in a trade node can pull trade forward, but cannot influence which link the trade travels on. When multiple downstream nodes are available, the destination for steered trade may be selected in the Trade mapmode.

Gaining merchants

Every country has a base of 2 Merchants. Permanent means of acquiring more include:

  • The following ideas give +1 Merchant each:
  • Completing the Trade Ideas group also grants +1 merchant.
  • The following countries have a unique idea that gives +1 merchant:
  • Merchant republics have +1 Merchant.
  • The East India Trade Company decision gives +1 merchant. This requires being a Christian country in Europe with diplomatic technology at level 10, at least two ports, and one province in the East Asian Trade Ports region owned.
  • With the Wealth of Nations DLC, Western nations get +1 merchant for each trade company they control with the majority of the provincial trade power in a region.
  • Countries that control one of a number of trade nodes have the Confirm Thalassocracy decision (requires all naval ideas and control of several specific trade nodes), which gives +1 Merchant.

Multiple merchant bonus

In addition to steering Outgoing Trade Value through a particular outgoing link, each Merchant applies a boost to the Trade Value on that link---that is, the steered Trade Value increases by a percentage as it passes between the two nodes, so that the Incoming Trade Value of the downstream node is larger than the corresponding Outgoing Trade Value of the upstream node. This affects all trade on that link, not just the Merchant's country, so multiple Merchants can boost trade on the same link. The total boost is:

Merchants Boost Cumulative
0 0.0% 0.0%
1 +5.0% +5.0%
2 +2.5% +7.5%
3 +1.6% +9.1%
4 +1.2% +10.3%
5 +1.0% +11.3%

More than five merchants will not increase boost further. The boost is modified by the country's Trade Steering; for example, if the first merchant's country has +20% Trade Steering the boost from the merchant will be increased to +6.0%. At current the merchant order is unsorted, so the merchant with the highest Trade Steering will not necessarily be first.

Modifiers

The following modifiers are shown on the trade panel.

  • Trade Efficiency: Half of Trade Efficiency is added as a bonus to all Trade Power. Furthermore, Trade Efficiency is added to Trade Income. Trade Efficiency is capped at 200%. It is increased by Diplomatic technology and certain ideas and decisions.
  • Trade Income: Trade Income is applied as a bonus to all money collected from trade. Each +1% Trade Efficiency produces +1% Trade Income, and several decisions and ideas increase income directly.
  • Trade Range: Merchants can only reach nodes at this distance from a cored province (or a cored province of a subject nation or a nation granting Naval Basing Rights). The distance is measured to the central province of the node, visible on the trade map mode. Range is increased by Diplomatic technology and some decisions and ideas.
  • Trade Steering: Trade Steering is applied as a multiplicative bonus to Trade Power used for steering when determining which outgoing node trade is steered to. Each point of Naval Tradition adds +1% Trade Steering. The sixth idea in the trade group gives +25% steering, while Aragon, Burgundy, the Mamelukes, Oman, Persia, the Hansa and nations with the generic idea group have a national idea or tradition giving a boost to steering.
  • Mercantilism: Mercantilism is applied as a bonus to provincial Trade Power. It does not affect any other Trade Power. Certain events and decisions give permanent increases or decreases to mercantilism. There is a special triggered modifier for European nations trading in Asia that provides +20% trade income if mercantilism is below 30% (as of patch 1.5 this trigger modifier is no longer limited by <30% mercantilism and its effect is now +5% trade income). There is no penalty for high mercantilism, unlike in EU3.

Embargo

Embargoing is an option in the diplomacy screen that allows a country to leverage their trade power against another nation's, decreasing that nation's trade power in nodes they both have trade power in.

Embargoing a country has the following effects:[1]

  • The defending country suffers a penalty to Trade Power in all trade nodes that both countries have power in. The base magnitude of the penalty is half of the attacker's Trade Power share in the trade node before the embargo. This penalty stacks multiplicatively with other modifiers.
  • The defending country's opinion of the attacking country is lowered by 15. The defender also gains a Trade Dispute casus belli against the attacker unless the embargo is mutual.
  • The attacking country's Trade Efficiency suffers a -5% penalty unless the defender is a rival.
  • Embargoes do not count against the Diplomatic Relation limit.

Embargo Efficiency can be increased by the following:

  • The idea Privateers (Espionage Ideas) gives a +33% bonus to Embargo Efficiency.
  • England's national ambition gives a +33% bonus to Embargo Efficiency.

East Indian Trade Route

File:East Indian Trade Route.png
This image shows the 'East Asian Trade Port' region colored with the corresponding trade nodes that the provinces belong to. The four red stars indicate the locations where at least one Merchants.pngmerchant must be placed.

The triggered modifier East Indian Trade Route, which grants a +20%Tradeview income.png Trade Income bonus, has a number of requirements that the player must fulfill in order for it to be triggered(activated):

  • Has discovered Cape of Good Hope, the southernmost tip of Africa.
  • Owns at least 4 coastal provinces.
  • Mercantilism.pngMercantilism is lower than 30%.
  • Has unlocked Exploration Ideas 2: 'Quest For The New World'.
  • Has technology group Western technology groupWestern.
  • Capital.pngCapital is located on the continent of Europe.
  • Has a Merchants.pngMerchant active in any of the following trade nodes(see image, in-game refers to the center province):
    • Malacca
    • Bengal
    • Indus
    • Ceylon

Note: Ownership of provinces in the East Indian Trade Port region is not required

Should the player lose any requirement, the bonus will be lost. The modifier can be regained by once again fulfilling the requirements.

Found East Indian Trade Company

If the player decides to establish a presence in East India, there is also an opportunity to get another trade bonus through a decision called 'Found Indian Trade Company' which grants:

  • +200 Gold Icon.png ducats
  • +1Merchants.pngMerchant
  • +5%Trade power.png Global Trade Power

Unlike the triggered modifier, this decision requires that the player owns a province in the 'East Asian Trade Port' region. This decision has the following requirements:

  • Country is not Netherlands
  • Is in the Christian religion group(CatholicismProtestantismReformed.pngOrthodoxy)
  • Capital.pngCapital is located on the continent of Europe.
  • Owns at least 2 coastal provinces.
  • Player is a human (not AI).
  • Has discovered the region 'East Asian Trade Port'.
  • Owns a province in the region 'East Asian Trade Port'.
  • Does not have the country modifier 'Portuguese East India Company'.

This decision should always be activated as soon as it is displayed due to the bonuses it provides. Netherlands can't activate this but has instead access to a more powerful decision called 'Found Oost-Indische Compagnie' which grants the standard bonuses as well as +25%Colonial range.png Colonial Range. Portugal too can receive a more powerful bonus than the standard decision, but that comes through an event and not a decision. This requires the Portuguese player to weigh the immediate benefits of the standard decision against the potential for a more powerful bonus that might be received. The bonuses given by this powerful event are:

  • +1Merchants.png Merchants
  • -1%Diplomatic technology cost Diplomatic Technology Cost
  • +10%Trade power.png Global Trade Power
  • +3%Tradeview income.png Trade Income
  • +20%Colonial range.png Colonial Range

The requirements for this event to fire can be found on the country page of Portugal.

Strategy

Producing trade value

The best place for a country to produce Trade Value is at the upstream end of a chain of Trade Nodes they control. The Trade Value can then be boosted as it moves down the chain.

Controlling trade nodes

Trade power share

Control of a trade node is dictated by a country's Trade Power share in that node. Thus, to control a desired node, a country should increase its Trade Power share in that node. Merchants only provide a token amount of Trade Power, and sending power upstream is extremely inefficient due to the -80% penalty (stacks multiplicatively, not additively, with other modifiers) for doing so. Thus, Trade Power largely comes from provinces and Light Ships. Effective ways on increasing one's share of Trade Power in a node therefore include:

  • Sending Light Ships to that node and sinking the Light Ships of other countries.
  • Constructing trade buildings in that node. Since several buildings give a percentage increase to trade power, provinces with base increases from estuaries will particularly benefit.
  • Conquering provinces in that node.
  • Embargoing other countries at that node.

Countries with low Trade Power share in a node benefit more from increasing their own Trade Power there than reducing the Trade Power of other countries. Likewise, countries with high Trade Power share in a node benefit more from reducing the Trade Power share of other countries than increasing their own Trade Power.

Desirable trade nodes

Desirable trade nodes to control include:

  • Nodes with high Trade Value, whether from local production or from upstream nodes.
  • Nodes with less competition from other countries, so that fewer resources need be expended to control the node.
  • Nodes connected closely with other controlled nodes, to take maximum advantage of boost.
  • The capital's trade node, where Trade Power is more effective.

Trade nodes that are critical to the global network include:

  • Gulf of Aden is a bottleneck for all seabound trade from India and China to Europe. It determines whether trade flows to Alexandria and the Mediterranean or around Africa to the Americas and western Europe.
  • Ivory Coast controls whether Asian and African trade flows to the Americas, to Seville, or overland to Tunisia and the Mediterranean.
  • Chesapeake Bay collects trade from all over the Americas, and may flow to either West Europe or S:t Lawrence. For most European nations, with the possible exception of a colonial Norway, steering it to West Europe is generally favorable.
  • Controlling West Europe allows steering trade to London, Antwerpen, Bordeaux or Sevilla. Controlling this node allows for near universal control of all trade going from the Americas.

Embargoing

  • It is rarely worth embargoing a country that is not also a rival:
    • Given that the attacker is willing to embargo the defender, they probably don't care about the diplomatic penalty for declaring rivals either.
    • The Trade Efficiency penalty for embargoing without declaring a rival is only worth it if the defender is a serious enough competitor to the attacker. But any such competitor is probably worth declaring as a rival anyhow.
  • Embargoes are most effective when:
    • The attacker already has a large but not overwhelming Trade Power share in the trade node(s)---about 50 to 80% before the embargo is best.
    • The defender has most or all of the remaining Trade Power share. As embargoes give a penalty to Trade Efficiency and the number or rivals is limited, only a few countries can be efficiently embargoed at a time.
    • The maximum absolute increase in Trade Power share at the base Embargo Efficiency is achieved when the attacker has a 65.4% share before the embargo. In this case, embargoing all of the other countries at that trade node increases the Trade Power share by 8.3% to 73.7%.
  • Countries with the largest Trade Power share that are performing a competing action should be targeted first---this removes the largest portion of competing Trade Power.
    • If collecting, all other countries are competing.
    • If pulling trade or steering, all countries that are collecting or steering in an undesired direction are competing.

Distributing merchants

Merchants are best sent where their country controls the most Trade Value, since the amount of income (when collecting) or steered trade (when steering) is proportional to the Trade Value controlled.

Collecting trade in capital

The capital trade node collects trade automatically, regardless whether a merchant is active there or not. Sending a merchant to collect in the capital merely adds an additional +10%Tradeview income.pngTrade Income to that specific capital trade node, which is a bonus not granted to other nodes when collecting. Collecting in the capital is generally only worth it for countries that have Trade Power concentrated in fewer trade nodes than they have Merchants.

Stationing a Merchant in the capital increases the income there by 10%, whereas collecting with a Merchant in another node halves the Trade Power. The halved Trade Power will never decrease income by more than half relative to having full Trade Power, so in most cases a country would have to control more than five times as much Trade Value in the capital as another node to justify stationing a Merchant in the capital.

Where to steer trade

Merchants set to steer trade have two effects; these will determine whether it is worth using a merchant to steer trade at a particular node.

  • Steering Merchants determine which direction trade leaves a node. If a node only has one outgoing link, or trade is already being steered in a favorable direction, then a Merchant is not necessary, though increasing Trade Power can increase the proportion of Trade Value pulled forward.
    • Light Ships can only be sent to nodes where the country already has Trade Power; however, a country with no Trade Power in a node can send a Merchant there, then follow up with Light Ships.
  • Using Merchants to boost is generally better done:
    • Near the end of a controlled chain of nodes, since this is where the amount of Trade Value to be boosted is often greatest.
    • Where there are not already other Merchants boosting trade, since each Merchant increases boost by less than the last.

Collecting versus steering

Ultimately, Trade Value has to be collected to be of any use. In most cases, it is better for a country to collect and gain 100% of their controlled Trade Value in a node than to send it downstream to somewhere that other countries will take a cut out of. However, if a country dominates the downstream node as well, the boost for steering trade can result in a net benefit. Therefore, some rules of thumb for collecting versus steering at a trade node are:

  • If a country has no Merchants or capital downstream of the node, they should always collect---transferring Trade Power upstream is extremely inefficient.
  • If a country dominates trade downstream of the node all the way to a collector, then the boost may outweigh the cut taken by other countries along the way, and steering trade may be a good idea. As of Patch 1.2, the boost is relatively small, so near-complete dominance is required to make steering the better choice.
  • Otherwise, it is better to collect.

The trade steering prisoner's dilemma

See also: Prisoner's Dilemma mathematical situation

Choosing to steer trade benefits all countries collecting downstream from a node, not just the one steering. Therefore, several countries could in theory cooperate to steer trade for mutual benefit. However, given the current mechanics, each country usually has an incentive to defect and collect instead.

Marginals

The marginal trade power share with respect to own trade power in a node is

 d(trade power share)/d(own trade power) = (1 - own trade power share) / total trade power

For example, if a country controls 25% of a trade node that has 150 total trade power, the marginal increase in trade power share per trade power is (1 - 0.25) / 150 = 0.5%. Keep in mind that own trade power refers to the net trade power, not base trade power, and is affected by e.g. Trade Efficiency and the halving for collecting outside the capital.

Collecting

If collecting, the marginal revenue collected (i.e. actual ducats) is

 d(trade revenue)/d(own trade power) = (100% + trade income modifiers) * trade value * (1 - own trade power share) / total trade power

For example, if a country is collecting in its capital's trade node, the change in actual ducats generated per unit of trade power would be calculated as follows:

 total trade power = Ptotal = 150
 net trade power after modifiers = POwn_net = 37.5
 net trade power share = POwn_share = POwn_net /Ptotal = .25
 incoming trade value = Vincoming = 5
 local trade value = Vlocal = 5
 trade value = Vtotal = Vlocal+Vincoming = 5+5 = 10
 trade revenue modifiers = rmodifiers = 0
 trade revenue = R 
 
 d(R)/d(POwn_net) = (100% + rmodifiers) * Vtotal * (1 - POwn_share) / Ptotal
 d(R)/d(POwn_net) = (100% + 0) * 10 * (1 - .25) / 150
 d(R)/d(POwn_net) = .05

This country would gain .05 ducats more each month if it added 1 trade power. If it added 100 trade power, the marginal change for another 1 trade power would be .018 ducats.

 d(R)/d(POwn_net) = (100% + rmodifiers) * Vtotal * (1 - POwn_share) / Ptotal
 d(R)/d(POwn_net) = (100% + 0) * 10 * (1 - (37.5+100)/250) / (150+100)
 d(R)/d(POwn_net) = (100% + 0) * 10 * (1 - .55) / 250
 d(R)/d(POwn_net) = .018

Forwarding

NB: Forwarding power is not the same as steering power. All steering power is forwarding power, but the forwarding power of countries without merchants in the node is not steering power. If forwarding, the marginal outgoing trade value is

 power used for collecting in node = Pretaining
 power used for forwarding = Pforwarding
 total trade power = Ptotal
 total trade value = Vtotal = Vlocal+Vincoming
 retained trade value = Vretained = Vtotal * Pretaining/Ptotal
 outgoing trade value = Voutgoing = Vtotal - Vretained
 d(Voutgoing)/d(Pforwarding) = (1 + merchant boost) * Vtotal * (1 -  Pforwarding) / Ptotal


If a merchant is present, the marginal amount of trade value steered to the country's selected outgoing node with respect to trade power in that direction is

 trade value steered in selected direction = Vselected_direction
 trade power in selected direction = Pselected_direction
 steering trade power share in selected direction = Pshare_favorable = Pselected_direction/Psteering
 value change from change in outgoing trade value =
   d(Voutgoing)/d(Pselected_direction) = d(Pforwarding)[verification of this term requested] * (1 + merchant boost) * Vtotal*(1 - Pforwarding) / Ptotal
 value change from more favorable steering =  
   d(Vfavorable)/d(Pselected_direction) =  (1 + merchant boost) * Voutgoing*(1 - d(Pshare_favorable)) / Psteering
 marginal amount of trade value in selected direction per trade power in selected direction=
   d(Vselected_direction)/d(Pselected_direction) =
   (1 + merchant boost) * (d(Voutgoing)/d(Pselected_direction)  + d(Vfavorable)/d(Pselected_direction) )

See also

References