Using an uncovered market embedded in Hotelling’s linear city model, this paper constructs a three-country, two-firm trade model with a three-stage game to explore the unilateral optimal export policy under Cournot competition, when the degree of horizontal differentiation is endogenously determined. The paper shows that a rise in the export tax creates a horizontal differentiation effect to mitigate competition by enlarging the degree of horizontal differentiation. This leads to the result that the optimal export policy of the domestic country is to levy a tax. However the optimal policy is free trade if the two firms act as local monopolists. The optimal policy is to subsidize, if the degree of horizontal differentiation remains unchanged in the short run. Lastly, the paper shows that a rise in the degree of horizontal differentiation raises the optimal rate of subsidy.