A Review of the Development of Fundamental Theories of International Trade and Trade Policy Instruments

Under the circumstances of global trade patterns adjustment, the rise of trade protectionism and the reconfiguration of supply chains, international trade theories and policy tools have been constantly evolving. Drawing on a literature review and case analysis, this paper reviews the development of classical, neoclassical, and new trade theories, analyzes major trade policy instruments, and examines their practical effects by comparing the U.S.-China trade war with the evolution of global trade rules. The research has found that the international trade theory has gradually expanded from differences in productivity and factor endowments at the national level to factors such as economies of scale, industry characteristics, and corporate behavior, trade policies have expanded beyond traditional tariffs to include non-tariff measures and export controls and the global trade governance has shown a trend of coexistence of a multilateral system and regional trade agreements. Free trade can enhance resource allocation and overall economic efficiency, but its benefits are unevenly distributed with respect to adjustment costs, trade protection may be justified under specific conditions, such as market failure, but prolonged protection can lead to resource misallocation and efficiency losses. Therefore, the effectiveness of trade policies depends on specific economic conditions, policy goals, and the scope of implementation.