Making Sense of US Tariffs and Serbian-American Trade Relations

Serbian-American Trade Under Spotlight

Serbia’s economic ties with the United States have historically been modest – a minuscule part of an already low-profile bilateral relationship. The US doesn’t even crack the top 10 of Serbia’s trading partners; in fact, it ranks around 19th as an export destination for Serbian goods. This means trade has long been an afterthought in Serbia–US economic relations, which tend to be dominated by tech investments. Even in 2024, total bilateral goods trade was barely around $1.4 billion – a rounding error for the US economy and only a couple of percent of Serbia’s overall trade. Serbian statistics show Serbia exported €619.5 million (~$684 million) to the US in 2024, while importing €683.7 million in US goods. By Serbia’s count, it ran a small trade deficit with America (about €64 million). US data, however, paints the opposite picture – Washington claims a large surplus on its side (about $814 million imported from Serbia vs. only $210 million exported to Serbia in 2024). This discrepancy is explained by different tracking methods: for example, if Serbian-made arms are sold to the US via third countries like Canada, US customs still count them as Serbian exports, whereas Serbia’s records might not.

Serbia’s export basket to the US is surprisingly varied given its size. It includes industrial goods, food products, and some military-related items. According to Serbia’s Chamber of Commerce data, top exports to the US in 2023 were: automobile tires (€123.7 million), a category of “uncategorized goods” largely comprising military equipment (€109.6 million), motor vehicle parts (€37.2 million), pet food (€27.4 million), and ammunition (€25.0 million). In plainer terms, one of Serbia’s biggest exports to America is car tires. Another notable export is military hardware: Serbia’s state-owned arms producers (like Zastava Arms and ammunition maker Prvi Partizan) have found a niche in the US civilian market, selling hunting rifles, AK-style sporting rifles, and surplus ammo to American consumers. Serbia also sends over automotive components (and even some Fiat cars manufactured in Serbia), frozen fruits (especially its famous raspberries), and specialty food items. FIAT automobiles assembled in Serbia are a major US import, followed by tires, frozen fruits & nuts (Serbia is a leading raspberry exporter), and hunting rifles & ammunition.

On the other side of the ledger, US exports to Serbia consist mostly of high-value machinery and equipment. Serbia’s imports from the US include power machinery and engines (nearly $188 million in recent years), aircraft parts and equipment (~$43 million), medical and pharmaceutical products, chemicals (e.g., polymers), and optical instruments. The US is also a source of technologies and know-how, less visible in goods trade figures, but significant via investments (over $4 billion in American investment in Serbia to date). Overall, trade has never been the cornerstone of Serbia–US relations; it’s been small and relatively balanced, with Serbia’s economy oriented more toward Europe. This perhaps explains why the recent tariff flare-up – and the sudden spotlight on bilateral trade – caught many in Belgrade off guard.

A 35% Tariff on Serbian Goods

On July 7, 2025, US President Donald Trump revealed that, starting August 1, the US will impose a 35% tariff on any and all imports from Serbia. In April, the US had floated a punishing 37% tariff rate for Serbia, before pausing and then revising it to 35%. Neighboring Bosnia-Herzegovina was hit with a 30% tariff, and other targeted countries (mostly those running big surpluses with the US) saw rates in the 25–40% range. In the Balkans, Serbia faces the steepest tariff by far.

President Trump justified the tariffs as part of his sweeping campaign to reset “unfair” trade relationships. Serbia ended up on a list of about 14 countries that received these tariff ultimatum letters, ostensibly because US data showed they run stubborn trade surpluses with America. In a letter addressed to Serbian President Aleksandar Vučić, the US side argued that the trade relationship is “far from reciprocal”, blaming Serbia’s tariffs and non-tariff barriers for America’s trade deficit. President Trump’s administration has employed a simplistic formula to calculate these country-specific tariffs – essentially taking the bilateral trade deficit as a percentage of that country’s exports to the US.

By that blunt logic, because (according to US figures) America imported roughly $814 million from Serbia and exported only ~$210 million to Serbia last year, Washington estimates a just tariff somewhere in the ballpark of the implied deficit percentage. Indeed, the 35% rate roughly corresponds to the size of Serbia’s reported surplus relative to its export volume. Economists have criticized this as a “shockingly simplistic” approach that treats trade deficits as if they were tariff rates, ignoring myriad other factors (like transshipment, data quirks, or the fact that Serbia’s surplus is negligible in absolute terms). But for a US president fixated on bilateral deficits, Serbia ended up in the crosshairs along with much larger trading nations.

In his letter to Vučić, Trump essentially said: Open up your markets, remove your barriers to US goods, and we can talk. The carrot in this stick-and-carrot approach is the prospect of a bilateral trade agreement. During an impromptu press conference, Trump even suggested some countries receiving such letters were already cutting deals: “Some of them wanted to make a deal… we’ve made deals also. So we can have a combination of letters, and some deals have been made,” he said, hinting that if Serbia negotiates, the tariffs might be averted.

One explicit remedy was offered to Serbia: move production to the United States, and your goods won’t face any tariffs. In both the Serbian and Bosnian tariff letters, Trump made a point of saying that companies from those countries could relocate manufacturing to the US to bypass the import duties. This is a rather extraordinary invitation: the US is effectively urging Serbian firms to invest in American factories, with a promise of fast-track permits, in place of exporting from Serbia.

What Can Serbia Manufacture in the US?

Caught between a rock and a hard place, Serbia is now examining Trump’s “loophole” suggestion: could Serbian companies avoid the tariffs (and even deepen ties) by investing in manufacturing on American soil? It’s a daunting proposition for a small economy, but not entirely far-fetched in select industries. Trump’s letter explicitly dangled this option, and indeed said the US would fast-track any Serbian investment that creates jobs in America. Let’s explore a few sectors where Serbia might feasibly establish a US presence – either through factories, joint ventures, or service partnerships – to both sidestep tariffs and align with US interests.

Firearms and Defense Production

One of Serbia’s most notable exports to the US is small arms and ammunition, primarily through the storied manufacturer Zastava Arms (which produces AK-pattern rifles and pistols) and the Prvi Partizan (PPU) ammo factory. These companies have strong demand in the American civilian firearms market – for example, Zastava’s PAP series AK rifles and M70/M90 models have a loyal following among US gun enthusiasts, and PPU ammo is stocked by major sporting goods retailers. Currently, Zastava operates via an Illinois-based subsidiary (Zastava Arms USA) that imports firearms from Serbia. However, given the double whammy of US tariffs and Serbia’s recent halt on arms exports (Belgrade temporarily suspended all weapons exports in 2025 amid geopolitical pressures), there is growing chatter about Zastava manufacturing locally in America. Industry watchers have floated the idea of Zastava setting up a US assembly line to mitigate these disruptions.

Such a move would not be unprecedented – several European gun makers already build weapons in the United States to ensure access to the US market. For example, Belgium’s FN Herstal produces virtually all the firearms it sells in the US at its South Carolina plant. Italy’s Beretta has a factory in Tennessee, Austria’s Glock manufactures some models in Georgia, and Turkey's Canik recently opened a Florida facility. These companies did so both to comply with US import restrictions and to brand themselves as “Made in USA” for American buyers. Zastava could pursue a similar strategy.

The company could partner with a US arms manufacturer or expand its subsidiary to begin assembling rifles stateside (using some imported components initially). If Zastava guns are made in the US, they would avoid the 35% import tariff and could even capitalize on “Buy American” sentiments. There are challenges, of course – US labor and production costs are higher, and part of Zastava’s appeal is its affordability. A recent analysis noted a locally made Zastava AK might end up costlier and “would likely come with a higher price tag due to American wages and taxes”, potentially pricing out some customers. It also raised the question of whether the US-made Zastava would retain its “Serbian character” in the eyes of enthusiasts.

Nonetheless, for critical niche products (e.g., certain calibers or models popular in the US), the company might find it worthwhile. Moreover, the US government might look favorably on diversifying supply chains for ammunition and arms, especially given recent disruptions in sourcing Russian-made ammo, so a Serbian-origin company building ammo domestically could suit American strategic interests. In summary, relocating some arms production to the US is one viable niche, exemplifying how Serbia could turn a trade barrier into an investment opportunity. The concept isn’t theoretical: if Russia’s “Kalashnikov” brand can no longer export to America but a local licensee (“Kalashnikov USA”) now builds AK-style rifles in Florida, then certainly Serbia’s Zastava can explore doing the same. It would keep their products flowing to the huge US market, tariffs or no tariffs.

Food & Beverage (Serbian Raspberries and More)

In the realm of consumer goods, agri-food products stand out as an area where Serbia has both a competitive edge and a reputation for quality. A prime example is raspberries – Serbia is famous as a raspberry powerhouse, for years one of the world’s top producers of red raspberries. In 2022, Serbia was the 3rd largest raspberry producer globally, after Russia and Mexico, and historically it has been the leading exporter of frozen raspberries, accounting for roughly one quarter of the world’s raspberry supply in peak years. These berries are a source of national pride (often dubbed “red gold”) and Serbia exports them mainly to EU markets. But there is also demand in the US for off-season or processed raspberry products.

Serbian officials have long recognized the need to move up the value chain – rather than just exporting frozen berries, Serbia wants to produce finished products like jams, juices, puree, or confections. Back in 2016, Serbia’s Economy Minister highlighted plans to support processing facilities and even start exporting raspberry products to the US and UK. Now might be the time to act on those ideas. Serbian food companies could invest in or partner to build a food-processing operation in the United States, using Serbia’s abundant fruit (or concentrates) as inputs to create packaged juices, organic preserves, or flavorings for the US market.

This strategy could apply beyond raspberries – Serbia also has high-quality plums (for juices or brandy), organic vegetables, confectionery (e.g., the iconic Eurocrem spread), and even wine that could find niches in the US market if properly branded. An example might be opening a joint venture facility in a US food hub (say, in California or the Midwest) where Serbian fruit purees are turned into premium jams or smoothie mixes for US retailers. Likewise, Serbian beverage firms (perhaps producers of mineral water or fruit juices) could bottle in the US to avoid hefty import costs. Such food-sector investments would have the added benefit of playing to Serbia’s strengths (agriculture) while meeting stringent US standards on-site.

By focusing on food and beverage products (like its famed raspberries) and investing in US-based processing, Serbia could preserve and even expand its access to the US market. It’s a way to turn a tariff problem into an opportunity – for example, a “Serbian Raspberry” branded line of organic jams made in the USA could highlight the best of both worlds. This would require capital and savvy marketing, but the tariff ultimatum might just spur that kind of innovation.

Will Serbia Manage to Cut a Deal Before Aug 1st?

As the August 1 deadline rapidly approaches, the central question remains whether Serbia can secure a last-minute deal to avoid the imposition of 35% US tariffs. Unfortunately, the odds are not in Belgrade’s favor. Serbia is not high on Washington’s list of trade priorities, especially given that President Trump issued tariff warnings to over a dozen countries, including major global players like Japan, South Korea, India, and the European Union. American trade officials have likely been preoccupied with negotiating settlements with these larger partners, making it unlikely that Serbia will receive a tailored agreement in such a short timeframe.

Instead, any positive outcome for Serbia would likely come from a broader US policy shift or a discretionary decision by President Trump himself. A formal free trade agreement is virtually out of reach, but a political decision to postpone or waive the tariff could still be possible if Serbia presents an appealing offer quickly. Trump has publicly stated that the August 1 deadline is “firm but not 100% firm,” implying flexibility for countries that propose alternative solutions. Serbia will almost certainly attempt to be one of those countries, though the question remains whether it can deliver a convincing proposal in time.

If the tariffs take effect, the consequences for Serbia could be significant. With $670 million in goods exported to the US in 2024, a 35% price increase would severely undermine competitiveness. Many Serbian companies, especially small and medium enterprises, would be priced out of the US market overnight. Beyond the immediate loss of export revenue, some contracts could be canceled, and future business opportunities may disappear unless quick alternatives are found. While the impact on Serbia’s overall economy may not be catastrophic, estimates suggest the combined direct and indirect losses could exceed €175 million annually, approximately 0.5% of GDP. Such losses would be particularly painful for export-oriented sectors and the regions that depend on them, with thousands of jobs potentially at risk. Around 10–15 large companies dominate Serbia’s US exports, but over 600 smaller firms that supply or depend on them could also suffer substantial damage.

If no exemption is secured, Serbia’s government will be forced to pivot from negotiation to mitigation. This may include emergency support measures for affected businesses, active pursuit of alternative markets, and symbolic gestures to demonstrate resolve. However, any retaliatory steps against the US would likely be counterproductive, given the asymmetry in trade volume and political influence. A more prudent approach would be to intensify diplomatic outreach, even after August 1, to secure tariff relief at the earliest opportunity. Serbia could also seek to coordinate with the European Union and other small economies affected by the tariffs, such as Bosnia, North Macedonia, Moldova, and Georgia, in a joint appeal that underscores the disproportionate impact on minor exporters.

In the short term, Serbia might offer to unilaterally remove any remaining tariffs on US imports as a good-faith gesture, aligning with Trump’s emphasis on reciprocity. It could also make symbolic purchases of American goods, such as agricultural equipment or energy products, to show a willingness to reduce the perceived trade imbalance. These actions would carry a relatively low cost for Serbia but might resonate politically in Washington.

Equally important is Serbia’s handling of the NIS (Naftna Industrija Srbije) issue, which poses a parallel challenge to bilateral relations. NIS is majority-owned by Russian entities under US sanctions, and while Serbia has received four temporary waivers from the US Treasury, the current exemption expires on July 29, 2025. A failure to resolve this could trigger sanctions enforcement, compounding the economic strain already threatened by tariffs.

Ultimately, the best-case scenario is a pragmatic understanding: Serbia takes modest steps to open its market and demonstrate alignment with US interests, and Washington, in turn, removes Serbia from the tariff list. President Trump has framed the policy not as a punishment but as an “invitation to make a deal.” Serbia should seize that opportunity with urgency, strategic thinking, and diplomatic finesse. The days ahead will be decisive in determining whether Serbian-American trade relations enter a period of strain or renewed cooperation.

Date: July 18

Authors: Aleksa Jovanovic, Andrej Cvejanov