← GlossaryTrade & Currency
Comparative Advantage
A country has a comparative advantage in a good when it can produce it at a lower opportunity cost than others, even if it is not the cheapest producer of everything. Trade lets each country specialise in what it gives up least to make, so both sides end up with more.
Why It Matters
It explains why countries trade at all, and why tariffs can erase an advantage that took decades to build.
In India
Tiruppur’s knitwear exporters compete with Bangladesh and Vietnam on speed, cotton supply and quality. At a 50% US tariff that edge disappeared; at 18% it came back.
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