Trade Theory is a branch of economics that explains how and why countries engage in trade with one another. It explores the benefits of trading goods and services, highlighting how countries can specialize in producing what they are best at, leading to increased efficiency and wealth. For example, if Country A is great at making cars and Country B excels in producing wine, both can benefit by trading these products. The theory also examines the impact of tariffs, quotas, and other trade policies on international commerce. By understanding these dynamics, policymakers can create strategies that promote fair trade and economic growth, ultimately improving the standard of living for their citizens.