This paper examines strategic trade policy games for firms of importing and exporting countries played as Stackelberg duopolies. We show that, if the firm of an importing country is a Stackelberg leader, the government of the importing country behaves as a leader imposing an import tariff, while the exporting country becomes a follower subsidizing the firm. Contrarily, if the firm of the exporting country is a Stackelberg leader, the government of the exporting country does not intervene and the importing country chooses to function as a leader by imposing an import tariff. Interestingly we discovered the equilibrium of the latter case is identical to that of Collie (1994) in which the firm of each country played a Cournot duopoly.

JEL Classification: F12, F13, L13