Trade creation

Trade creation is like when you and your friend both have some toys that the other person really wants, and you decide to swap them. Now you both have toys that you like more than before!

In countries, this happens when they start trading with each other. Let's say there are two countries, Country A and Country B. Country A is really good at making bananas, and Country B is really good at making Apples. But, both countries also want to have both bananas and apples, even though they can't make them as well as the other one.

So, Country A starts trading some of their bananas with Country B in exchange for some of their apples, so now both countries have access to both bananas and apples, even though they didn't make them themselves. This is called trade creation, because both countries now have more goods to choose from and everyone is better off.

It's like when you and your friend each have something the other wants and you trade, now you both have more toys to play with!