You are not looking at the big picture here. You don't want the elves to fear your zombies, you want them to fear your dwarves.
Getting attacked by zombies counts as a tragic event. If the soldiers are properly trained, zombies have trouble getting through their metal armor. So what you do is station your soldiers inside this zombie pit. After a few months of fighting for their dear life against the horde, they will eventually reach the point where they "don't really care about anything anymore".
Give each of these soldiers a pet. Something to love and grow attached to. Then, when the elven caravan arrives, station these soldiers opposite the traders. Don't have them do anything, just let them wait. At this point you drop down their pets in front of their feet from a considerable height. Make a nice big splash.
Your soldiers will just stand there, unfazed. Their beloved pets, the only thing in the entire world they held dear, just splattered all over them. But these aren't ordinary soldiers. These are hardened dwarven soldiers. After the initial hysteria is over, the elves will notice this. They will notice the soldiers' eyes. Dead eyes that ignore all the tragedy around them, fixating on their targets. Fixating on the elven traders. This is when the soldiers move into action. Kill all the pack animals and almost all the elves, but remember to leave one alive. One needs to escape to spread the fear.
Zombify the elf corpses, cage them and chain them inside the depot. The elves will be foolish enough to bring new traders next year. They haven't learnt yet. So teach them.