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The battle takes place in Tokyo, Japan. Smaug takes the place of Gypsy Danger.

Which Dragon wins? The Acid Dragon -vs- The Red Dragon.

Otachi
http://pacificrim.wikia.com/wiki/Otachi

I'm going to go with Otachi here.

Smaug hasn't really done anything impressive yet except drive out a load of surprised, fat midgets from a big cave.

Given that all we know from the next movie is that he gets killed by a big crossbow bolt then it's safe to say he'd get beat by most big opponents.

Otachi could crush Smaugh with it's tail alone

In terms of sheer physicality, they are probably close with a slight edge to Otachi. Acid is what puts this in the Kaiju's favor imo.

Acid and far better durability