Trump’s tariffs challenge Serbia’s thriving military industry

Serbia’s arms export industry, a cornerstone of its economy, faces a significant challenge as the United States imposes new tariffs on Serbian goods, particularly civilian weapons and ammunition.

Effective 1August, these tariffs, announced by U.S. President Donald Trump, could disrupt Serbia’s lucrative trade with the U.S., one of its largest export markets.

President Trump announced on 7 July via Truth Social that the U.S. will impose a 35% tariff on Serbian exports and a 30% tariff on Bosnian exports starting 1 August.

These measures, outlined in letters to the presidents of Serbia and Bosnia and Herzegovina, are part of a broader U.S. policy to address trade imbalances and promote domestic production. The tariffs are slightly reduced from earlier proposals in April (37% for Serbia, 35% for Bosnia) and follow a 90-day tariff pause for most countries, excluding China.

Trump justified the tariffs as a step toward “more balanced and fair trade,” citing the U.S. trade deficit with Serbia and Bosnia. He urged both nations to relocate production to the U.S. to avoid the additional costs. For Serbia, whose civilian weapons and ammunition are among its top exports to the U.S., these tariffs pose a direct threat to a vital industry.

Serbia’s arms export industry

Serbia’s arms sector, led by state-owned companies Zastava Oružje in Kragujevac and Prvi Partizan in Užice, is a major player in the U.S. market.

According to the Republican Statistical Office of Serbia, civilian weapons and ammunition rank among Serbia’s top ten exports to the U.S.

Zastava Oružje exports semi-automatic rifles, such as the M70 (a civilian variant of the Soviet AK-47), along with hunting and shooting equipment. Prvi Partizan specializes in ammunition, including non-standard calibers like the 7.62×39 mm used in the M70.

Zastava’s M70 rifle, sold through its U.S. subsidiary Zastava Arms USA, retails for approximately $1,500 and enjoys a strong reputation for quality.

In 2021, Zastava secured a $234 million, five-year contract to supply the U.S. market, ensuring full production capacity, as noted by then-director Milan Petković.

Prvi Partizan, through its subsidiary PPU USA Ammunition, meets the high U.S. demand for ammunition, particularly for sporting and hunting purposes.

Potential impact of tariffs

The 35% tariffs could significantly increase the cost of Serbian products in the U.S., potentially pricing them out of the market. Military analyst Aleksandar Radić warns that higher prices may drive American consumers to cheaper domestic or alternative foreign products, aligning with the U.S. administration’s goal of boosting local manufacturing. Radić told Radio Free Europe (RFE), “Washington wants to discourage the purchase of foreign products and return to domestic production.”

Milojko Brzaković, former director of Zastava Oružje, believes the industry can weather the tariffs if the export chain – factories, traders, and U.S. buyers – shares the financial burden. “The factory can lower prices, traders can reduce margins, and American consumers may need to accept higher costs,” Brzaković told RFE. However, sustained price increases could erode Serbia’s competitive edge, threatening its market share.

Geopolitical and military export dimensions

Beyond civilian exports, Serbia’s arms trade has drawn geopolitical scrutiny. According to the Arms Trade Treaty (ATT) in Geneva, Serbia exported 1,757 heavy artillery systems to the U.S. in 2024, a sharp increase from 208 the previous year. While the U.S. does not heavily rely on Serbian imports for its armed forces, Radić suggests much of this equipment is redirected to third countries, potentially including Ukraine.

Brzaković notes that military exports are a “different story” from civilian ones, with limited direct impact from the tariffs.

In June Russia’s Foreign Intelligence Service accused Serbia of indirectly supplying ammunition to Ukraine via NATO countries. The Serbian government denied these claims, emphasizing it cannot control the final destination of its exports.

President Aleksandar Vučić, in an interview with The Jerusalem Post, claimed Serbia was “the only one in Europe currently trading military ammunition with Israel.” However, following the escalation of the Israel-Iran conflict, Vučić announced a suspension of ammunition exports on 23 June amid questions about Serbia’s neutrality.

Serbia halts arms exports to Israel amid domestic unrest and international scandals

Serbian authorities, including the Ministry of Defense, Zastava Oružje, and the Serbian Chamber of Commerce, have not publicly commented on the tariffs, according to RFE. The American Chamber of Commerce in Serbia (AMCHAM) expressed hope for a solution to maintain strong U.S.-Serbia trade relations without additional burdens. The silence from Serbian stakeholders underscores the uncertainty facing the industry as the August 1 deadline approaches.

With the tariffs set to take effect, Serbia’s arms exporters face a critical test. Companies like Zastava Oružje and Prvi Partizan must navigate rising costs while maintaining their foothold in the competitive U.S. market.

Strategies such as cost-sharing across the supply chain may provide short-term relief, but long-term success may require diversifying markets or exploring U.S.-based production, as suggested by Trump.

The broader implications of the tariffs extend beyond economics. As the country grapples with external pressures and trade challenges, the resilience of its arms export sector will be closely watched.

Other sources: Radio Free Europe/Radio Liberty, Reuters

Caption: US President Donald Trump (R) participates in a signing ceremony and trilateral meeting with the President of Serbia, Aleksandar Vucic (L), and the Prime Minister of Kosovo, Avdullah Hoti (not pictured), at the White House, 4 September 2020. Photo: EPA-EFE/ANNA MONEYMAKER / POOL