Mitigating the Impact of US Tariffs on Serbian Exports: A Policy Strategy for Resilient Trade Relations

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Introduction

In April 2025, the US imposed a 37% tariff on all Serbian exports under a “reciprocal tariff” policy based on trade deficits, despite Serbia representing only 2% of US imports. Though the tariff was later paused for 90 days, it remains a serious threat, especially to Serbian SMEs with limited flexibility.

Aside from exploring Serbia’s tariff relief strategy, this paper also recommends deepening subnational ties with key US states—Ohio, Illinois, Michigan, Georgia, Florida, and California—through MoUs, diaspora engagement, and joint trade projects. These state-level partnerships can generate political support and tangible economic opportunities beyond federal channels.

The US “Trade Deficit Tariff” Formula Explained

The core formula underpinning the tariffs calculates a country-specific rate using a simplified equation:

Formula (simplified): US Tariff % ≈ 0.5 × (US Trade Deficit with Country / US Imports from Country) × 100%, with a floor of 10%

The large trade deficit in early 2025 was not the result of Serbian trade barriers but rather temporary flows linked to niche Serbian exports and seasonal imbalances, common in small, open economies.

Understanding and deconstructing this formula is essential for Serbian negotiators. The Trump administration’s premise is transactional: reduce the perceived trade imbalance, and the US will reduce or lift the imposed tariff. Serbia must therefore present a case that both corrects the data-driven misconceptions and offers win-win measures that fulfill Washington’s call for “reciprocity” without harming Serbia’s economic interests.

Disproportionate Impact on Serbian Exports and SMEs

In 2024, Serbia exported $670 million to the US, with key sectors affected including automotive ($200M), arms and ammunition ($60M), machinery ($70M), metals ($39M), and food ($66M). While the top 10-15 large multinationals handle most of the trade, 660 of SMEs face severe risk from the new tariffs.

Indirectly, Serbia may lose up to €175 million annually through EU–US supply chain disruptions—about 0.4% of GDP. Though the national economy can absorb the hit, vulnerable sectors and regions cannot. Targeted diplomatic and domestic action is urgently needed to avoid long-term harm.

Comparative Lessons and Recommendations for Serbia

Serbia is not alone—US “reciprocal tariffs” in 2025 also hit small economies like Bosnia (35%), North Macedonia (33%), Moldova (31%), Georgia, and Armenia (10%), despite their modest trade volumes. Like Serbia, these countries responded with quiet diplomacy, avoided escalation, and sought multilateral support.

Larger economies like the EU, India, Vietnam, and Australia also faced tariffs but secured relief through a mix of reciprocal offers (e.g., Vietnam’s big-ticket purchases, India’s market access adjustments), diplomatic and legal channels (e.g., EU’s joint taskforce, India’s use of trade forums) and leveraging alliances (e.g., Australia’s AUKUS and FTA ties).

Key takeaways for Serbia:

• Act regionally, not in isolation: Partner with Bosnia, North Macedonia, and others to present a united Balkan front against US tariffs.

• Emphasize the gap between perception and reality: Point out potential discrepancies in US data.

• Leverage International Forums: Encourage WTO member partners with Serbian supply chain links to raise the issue diplomatically and signal global disapproval.

• Offer Reciprocal Concessions: Propose eliminating tariffs or trade barriers on US goods to meet Washington’s demand for fairness, similar to Vietnam and the EU’s strategies.

• Increase Targeted Imports: While limited in size, Serbia can commit to buying more US goods (e.g., farm machinery, medical equipment) to help reduce the trade imbalance and signal goodwill.

• Emphasize Strategic Partnership: Though not a formal ally, Serbia can highlight its strategic dialogue with the US, regional stability contributions, and history of constructive relations, mirroring Australia’s successful approach.

• Be Patient and Proactive: Understand that tariff relief will require persistence and credible offers. If Serbia presents a strong, cooperative case by July, the US may extend the pause or lift the tariff altogether.

Serbia’s Strategy

Serbia must adopt a balanced strategy of internal support and external diplomacy. This paper outlines six strategic goals:

1. Prevent Further Tariff Escalation: Serbia should use diplomacy and trade data to persuade the US to maintain the suspension and restore normal trade access, emphasizing Serbia’s openness and strategic alignment with Western partners.

2. Support Exporters and SMEs: The government should provide tax relief, export insurance, technical assistance, and liquidity support to help affected companies, especially SME, survive the shock and find new buyers.

3. Offer Reciprocal Concessions: Serbia can lower or eliminate tariffs on selected US goods to demonstrate goodwill and address US concerns over “reciprocity,” strengthening its case for relief without harming domestic sectors.

4. Restore Pre-Tariff Access and Expand Trade Tools: Serbia should seek reentry into programs like GSP or MFN and explore bilateral trade or investment agreements to secure predictable, long-term access to the US market.

5. Address Non-Tariff Barriers (NTBs): Serbia can align product standards and customs rules with US expectations to reduce technical trade barriers and eliminate friction that may have triggered the tariff action.

6. Diversify Export Markets: Serbia must reduce reliance on the US by expanding exports to the EU, China, India, MENA, and the EAEU, targeting sectors most affected by the tariffs.

Strengthening Subnational Cooperation with Key US States

Subnational diplomacy offers Serbia a powerful avenue to deepen trade, attract investment, and build political goodwill in the US. Many US states have economies as large as sovereign countries and independent trade agendas. By targeting states with strong diaspora ties or strategic economic overlap, Serbia can generate bottom-up support for tariff relief and broader economic cooperation. A dedicated subnational diplomacy unit within Serbia’s MFA or Chamber of Commerce should coordinate these efforts, backed by diaspora professionals as honorary trade envoys.

Ohio

• Over 200,000 Serbian-Americans; long-standing military partnership (National Guard).

• 2023 MoU established economic collaboration in trade, investment, and R&D.

• Projects include trade missions, fruit and honey exports, Cooper Tire investment, and university ties.

• Diaspora advocacy in Cleveland and Columbus strengthens political traction.

Illinois

• Largest Serbian diaspora in the US; Chicago–Belgrade are sister cities.

• Opportunities in food export, agri-tech, machinery, tech services, and real estate investment.

• Political outreach through local leaders can amplify Serbia’s message on trade.

California

• Serbian tech diaspora in Silicon Valley enables startup ties and VC access.

• Potential for “innovation bridge” in AI, biotech, and green energy.

• Wine, truffles, and cultural promotion can build consumer brand presence.

Georgia

• Key strengths: Port of Savannah, logistics (UPS HQ), auto and film industries.

• Collaboration with Georgia Tech and Emory could link academic ecosystems.

• Serbia could position itself as a Southeast Europe logistics hub for Georgia-based exporters.

Michigan

• Direct auto industry links through Adient and Aptiv; potential to expand supply chain integration.

• University of Michigan could partner in smart mobility R&D.

• Detroit-based diaspora and industrial partners can advocate for trade relief.

Florida

• New Belgrade–Miami flight and upcoming consulate enable trade and tourism links.

• Opportunities in health-conscious exports (berries, honey, wine), tech (via “Silicon Beach”), and real estate investment.

• Universities like FIU and UF open avenues for joint research and academic exchange.

Date:
May 9th 2025

Authors:

Vuk Velebit, Pupin Initiative
Petar Ivić, Pupin Initiative
Aleksa Jovanović, Pupin Initiative