I think terms of trade is basically calculated through two countries coming upon agreement so that both countries benefit from trade, (i.e. minimize opportunity cost). For example, if US' opportunity cost, domestically, to make a cellphone is 3 pizzas and Mexico's opportunity cost to make a cellphone is 2 pizza, domestically, then they will agree on terms in which Mexico imports 2 < terms of agreement < 3 in order for the US to benefit from the trade. Other factors are generally included to decide whether the opportunity cost is closer to 2, better for the US, or closer to 3, better for Mexico.

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