This paper explores the role of information in the formulation of trade policy for home and foreign country, in a setting in which the home government chooses its subsidy level first after which the foreign firm retaliates by imposing tariffs on its imports. Two main information setups are considered: (i) when home firmís costs are private information, (ii) when foreign firmís costs are private information. In addition, we also consider the case when both firms costs are private information. We show that a low-cost home firm has an incentive to misrepresent itself as high-cost in the first case while the foreign firm has an incentive to misrepresent itself as low-cost in the second case. This is understood by the firms and both policymakers and results in the home†government setting a higher subsidy in the signalling case compared to the case when the home firmís output was not a signal of its costs in the first case and set low subsidy in the second case. The foreign government sets the same tariff under both signalling and no-signalling in the first setup while the tariff is higher in signalling than in no-signalling case in the second setup. We show that trade policy intervention is not the first best policy.