Yeah, that's pretty much the gist, but I also mean trading resources between colonies. I personally think it's better to focus the big production buildings (like Cigar factories) in one or two cities (Usually the coastal) while having smaller (usually inland) cities produce raw materials (like tobacco).
You make your wagons send the raw materials from the small inland cities to the large coastal ones where they get turned into the finished good and then you can load them up on the caravel and sell them to Europe or Native Villages that say they want them.
Other thoughts on trade:
-Try to not trade raw materials (cotton, tobacco, furs) except in the first few shipments. Selling these can trigger tax increases, so it's best to always sell the products in their finished form.
-Islands close to the Europe border can be useful for storing all your finished goods before you sell them (you can automate caravels/merchantmen/galleons to trade between colonies as well). This can be handy when you really get your production going and your free colonists from the Europe docks become more scarce.
-Name your wagon trains (click the wagon train name on the lower right screen) to keep track of what they are carrying, it can save time if you start to get confused about what's going where.