Trump’s reciprocal tariff hits Surat’s already struggling diamond industry

Just as the diamond industry in Surat was stabilising from a severe recession, US President Donald Trump’s imposition of a steep 26% tariff has struck it like a thunderbolt, say industry leaders. 

India is the global leader in cutting and polishing diamonds, with Surat at the forefront, and the majority of these diamonds are exported to the US. Hence, this new tariff is expected to reduce export volumes and push the industry into a tough spot.

The 26% tariff announced by Trump is set to take effect from Tuesday. With global economic instability and ongoing trade tensions, the diamond industry is already under intense strain. 

High tariffs to slash exports

According to industry insiders, exports will inevitably decline due to the high tariffs, affecting not just the natural diamond segment but also lab-grown diamonds, which are now subjected to a 29% tariff. Notably, both polished and lab-grown diamonds were previously exempt from any duty (0%). 

In the financial year 2023-24, India exported $32.85 billion (~₹2.84 lakh crore) worth of gems and jewellery, with the US accounting for 30.28% of that volume. In 2024 alone, India exported $11.84 billion (~₹1 lakh crore) worth of diamonds, gold, and silver, of which 13.32% comprised cut and polished diamonds, lab-grown diamonds, plain gold jewellery, studded gold jewellery, and silver ornaments sent to the US.

What do industry experts say about the US tariffs?

Tariff equals profit margin — a blow to the industry

The 26% tariff is nearly equal to the industry’s profit margins, severely impacting viability. Exporters who used to send ₹100 worth of goods will now have to sell them in the US for ₹126 — a jump that consumers are unlikely to absorb easily. The margin is too narrow to survive such a sharp hike, making the tariff a significant challenge.

-Babu Vaghani, head of the Lab Grown Diamond Association (LGDA) 

Exports likely to decline, though market may stabilise gradually

Despite high gold prices, demand remains steady in Asian countries like India. Similarly, diamonds are culturally important in the US, but a sudden price rise due to tariffs is expected to reduce short-term purchases. In 2023-24, India’s gem and jewellery exports to the US totalled $9.95 billion (~₹86, 157.79 crore). However, the hope that this figure would rise to $11.58 billion (~₹1 lakh crore) in 2024-25 now seems bleak. That said, there remains a possibility of market stabilisation in the future.

-Dinesh Navadiya, regional chairman of the Gem and Jewellery Export Promotion Council (GJEPC)

Reduced purchases

Previously, there was no duty (0%) on these exports, with an average cost of around 6% for insurance and related expenses.  This increase will likely reduce consumer purchases, directly impacting Indian exports. Given that the US is the largest market for India’s diamonds and gem jewellery, the 26% tariff is a major blow to the industry.

-Laljibhai Patel, chairman at Dharmanandan Diamonds Pvt Ltd

Industry in wait-and-watch mode

Following the tariff announcement, purchasing activity in the US has come to a halt. As a result, diamond traders in Surat have also stopped buying rough diamonds. The industry is currently in a state of suspense and watchful waiting. However, the Indian government is approaching the issue with caution, and there is hope that the good relationship between Donald Trump and Prime Minister Narendra Modi will yield positive outcomes in the near future.

-Sevanti Shah, diamond proprietor