The US argument for protectionism against China is based on the theory of competitive advantage, which posited that trade occurs when one nation is better at pr

The US argument for protectionism against China is based on the theory of competitive advantage, which posited that trade occurs when one nation is better at producing something than other nations. That old model has been revised in favour of a more nuanced understanding. Paul Krugman was awarded the Nobel Prize for economics in 2008 for his work on the Home Market Effect, which established that nations of similar economic levels trade most with each other. Rich countries with larger demand for high quality goods will tend to specialize in those goods and consequently will tend to trade more with other rich countries, which have similar demands in their domestic markets that can be satisfied by imports. Hence, trade occurs between similarly rich countries. The effect is similar to the way restaurants thrive in areas where there are more restaurants.