How did an unfavorable balance of trade weaken the Spanish Empire?

An unfavorable balance of trade occurs when a country imports more goods than it exports. In the case of the Spanish Empire, this situation meant that Spain was relying heavily on foreign goods while failing to produce enough domestically to support its economy. This dependence on imports drained the Empire's wealth, as gold and silver were often used to pay for foreign goods, leading to a trade deficit. Rather than fostering economic strength through production, this scenario weakened Spain's economy because domestic industries were not being developed or utilized effectively. As a result, the Empire's economic structure became more fragile, ultimately contributing to its decline.

The other options do not reflect the core issues related to an unfavorable balance of trade. While factors like taxation and tariffs may have had their own economic effects, the primary concern regarding a negative trade balance is about the failure to balance imports with domestic production, destabilizing the Empire's economy over time.