This paper introduces strategic interactions into a Ricardian model where two countries optimize trade policies. In a Nash Equilibrium, we find that optimal import tariffs are zero, while export taxes rise with comparative advantage, aligning with but extending the unilateral model of Costinot et al. (2015) by allowing both countries to act strategically. Our analysis reveals that welfare gains from trade policy diminish when both countries pursue optimal policies. Surprisingly, a smaller country can benefit from Nash Equilibrium through higher export taxes in goods with technological advantages. Applying the model to agriculture, we assess welfare under autarky, free trade, Nash Equilibrium, and unilateral policy, showing that small, competitive nations can outperform free trade through strategic policy, providing insights into optimal trade policy across goods.
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