Kosovo raised taxes on Serbian goods by 10 percent on Tuesday, saying the move was in retaliation for Belgrade's efforts to thwart recognition of its former southern province.
Kosovo's government said the tax would apply to all products coming from Serbia excluding international brands. The measure is "a response to Serbia's savage campaign" against the international recognition of Kosovo, said Prime Minister Enver Hoxhaj.
Tensions between Serbia and Kosovo, which declared independence a decade ago following a brutal separatist war, have simmered in recent months as both are under pressure to normalise relations if they are to make progress towards joining the European Union.
Serbia, with backing from Russia and China, refuses to accept Kosovo's independence and still considers the ethnic Albanian-majority territory a renegade southern province despite its being recognised by around 115 UN members.
Serbia regularly says it has convinced various foreign nations to revoke their recognition of Kosovo, though Pristina disputes most of the claims.
"Serbia is spending huge sums to undermine the sovereignty of the state," said Hoxhaj.
More From This Section
Despite the disagreement over Kosovo's status, trade has continued and Serbia is its top regional trade partner. Serbia's exports to Kosovo, mainly food products, total 400 million euros annually, according to data provided to AFP by Kosovo customs authorities.
Brussels-led talks between Kosovo and Serbia to resolve the situation have dragged on for years, with tensions stoked by frequent tit-for-tat disputes.
Their diplomatic deadlock garnered attention in August when officials on both sides discussed the possibility of border changes as part of deal to reset ties.
Yet no concrete plan has emerged and the last scheduled meeting between their two presidents fell apart at the last minute in September.
Local media speculated that a Serb-dominated part of Kosovo could be traded for a mostly Albanian region of southern Serbia.
Rights groups have strongly condemned the proposal, warning that redrawing the map could have a dangerous domino effect in the fractured region.