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The recent imposition of additional tariffs by the United States on Indian goods, particularly diamonds, is poised to deliver a significant blow to Surat, a major diamond export hub in India. This development has sent shockwaves through the industry, especially given the proximity to the crucial Christmas season, which accounts for a substantial portion of annual diamond sales. The unexpected tariff increase has forced diamond companies to reconsider orders already placed by American clients, creating uncertainty and potential financial losses. India's diamond exports, especially non-industrial diamonds used in jewellery and investment, will be significantly impacted. Data from the Gems & Jewellery Export Promotion Council (GJEPC) reveals that India accounts for a major portion of US diamond imports, specifically 68% by volume and 42% by value, amounting to $5.79 billion in 2024. With the new tariffs in place, India’s competitive edge in the American market is threatened, opening opportunities for other diamond exporting countries with lower tariff rates. The fear is that the increased tariffs will lead to a substantial decrease in exports, impacting not only businesses but also the livelihoods of many workers in the industry. The sector is highly labor intensive, with a large workforce engaged in cutting, polishing, and other related activities. The potential consequences include job losses, reduced production, and overall economic disruption. The diamond industry is a complex and interconnected global network, and changes in one part of the system can have ripple effects throughout the entire supply chain. The imposed tariffs act as a barrier to trade, disrupting existing trade patterns and creating new challenges for businesses attempting to navigate the altered landscape. The situation is especially concerning because the diamond industry in Surat has already been facing challenges in recent years. As reported by Hitesh Patel, director of Dharmanandan Diamonds Pvt Ltd, exports to the US have fallen significantly in the past couple of years, and production in factories has dropped considerably. The new tariffs will exacerbate these existing problems, leading to further declines in exports and production. The industry is at a critical juncture and needs to adapt to the changing market conditions and find ways to mitigate the negative effects of the tariffs. The Gems & Jewellery Export Promotion Council is urging the government to take action and support the industry during this difficult period. The organization has made suggestions to the Commerce Ministry, including introducing a targeted reimbursement mechanism for a percentage of the additional tariffs imposed by the US. This type of support could provide some relief to businesses and help them remain competitive in the US market. The diamond industry in Surat is a major contributor to the Indian economy, and its success is crucial for the livelihoods of many people. The tariffs are putting immense pressure on the businesses and workers in this sector, and it is imperative that steps are taken to safeguard their future. The consequences of inaction could be severe, leading to significant economic and social disruption. The situation requires a comprehensive response from the government, industry stakeholders, and other relevant parties to address the challenges and ensure that the diamond industry continues to thrive in India. The need for collaboration and proactive measures cannot be overstated. The future of the diamond industry in Surat hinges on the ability to overcome the challenges posed by the tariffs and adapt to the changing global marketplace.
The additional 25% tariff imposed by the US comes at a particularly inopportune time, given the approaching Christmas season. Sales during this festive period account for a substantial portion of the industry's annual revenue. For many diamond companies, Christmas sales represent a critical opportunity to generate profits and sustain their operations throughout the year. The tariffs threaten to reduce exports to the US during this peak sales period, resulting in significant financial losses for businesses. To make matters worse, the US is considering increasing the tariffs even further. As Hitesh Patel points out, industry players are closely monitoring developments on August 27, when a 50% tariff is scheduled to take effect. This potential increase could have a devastating impact on the diamond industry, potentially leading to widespread business closures and job losses. Companies are exploring various strategies to cope with the tariffs, including negotiating with buyers in the US to share the burden. However, this approach may not be sustainable in the long run, especially if the tariffs remain in place for an extended period. The chairman of the GJEPC, Kirit Bhansali, has emphasized that the high tariffs and significant reduction in exports will have a severe impact on Surat and Mumbai, two major centers of the Indian gems and jewellery sector. The industry is a vital source of employment and economic activity in these cities, and the potential negative consequences cannot be ignored. The export of cut and polished diamonds to the US has already been declining in recent years, falling from $9.86 billion in 2021-22 to $4.81 billion in 2024-25. The US is the largest export market for Indian gems and jewellery, accounting for nearly a third of total annual exports. The tariffs exacerbate this existing downward trend, making it even more difficult for businesses to maintain their competitiveness in the US market. The GJEPC has written to the Commerce Ministry to request assistance for the industry. The council's suggestions include implementing a targeted reimbursement mechanism for the tariffs, which could help mitigate the negative impact on exports. The GJEPC estimates that the tariffs could lead to the loss of 125,000 jobs in the coming months, particularly in the states of Gujarat, Maharashtra, and Rajasthan. This job loss will have a ripple effect throughout the economy, impacting related industries and sectors. The reduced exports and job losses will create further economic challenges for the affected regions. The situation requires immediate action to address the problem and provide support to the affected businesses and workers. The diamond industry is a key component of the Indian economy, and it is imperative that measures are taken to protect its future. The challenges posed by the tariffs require a coordinated effort from the government, industry stakeholders, and other relevant parties to ensure that the industry remains competitive and sustainable.
The structure of the diamond industry is also a factor that complicates the response to the tariffs. Vallabhbhai Lakhani, the owner of Kiran Gems, one of the top players in the market, points out that it is not possible to reroute diamonds to the US from other countries with lower tariffs because the place of processing must be specified. This restriction limits the ability of companies to circumvent the tariffs by routing their products through alternative locations. The US is also unlike other export destinations in terms of its consumption capacity. As Vijay Mangukiya, Chairman of Dhani Jewels, explains, no other country can replace the US in terms of diamond consumption. While there are other export destinations for Indian diamonds, they do not match the scale of the US market. Dharmanandan Diamonds, a company with a global presence, has also been affected by the declining demand for diamonds. The price of rough diamonds has fallen significantly in recent years, reflecting the weakness in the international market. Out of every 10 polished diamonds found in the world, eight are cut and polished in Surat, making the city a vital hub for the industry. Surat is home to thousands of diamond factories employing a large workforce of polishers. This workforce is comprised mostly of migrants from the Saurashtra region of Gujarat, highlighting the importance of the industry to the livelihoods of many individuals and families. The potential job losses caused by the tariffs would have a devastating impact on these communities. The GJEPC has expressed concern that the tariffs could erode India's market share, lead to the cancellation of existing orders, and block working capital. The council also notes that other competing countries, such as Turkey, Vietnam, Thailand, and Dubai, face lower tariffs in the US market, making Indian products relatively less competitive. There is also a risk of trade rerouting through low-tariff destinations, which could further impact Indian exports. The GJEPC suggests that there is a possibility of exploring the UK as a potential market, following the removal of duties on gems and jewellery imported from India. However, the UK market is significantly smaller than the US market, so it is unlikely to fully compensate for the decline in exports to the US. De Beers, one of the world's leading diamond mining companies, has curtailed production in response to the lower demand, further impacting the diamond industry in Surat. The diamond cutting and polishing units in Surat have also reduced production, reducing the working hours of diamond polishers. Some businesses have diversified into producing lab-grown diamonds, which are cheaper than natural diamonds. However, the prices of lab-grown diamonds have also fallen, creating further challenges for the industry. The industry is facing a complex set of challenges that require a coordinated and comprehensive response. The tariffs imposed by the US are a major setback, but the industry is also facing other challenges, such as declining demand and increasing competition. It is imperative that the government, industry stakeholders, and other relevant parties work together to address these challenges and ensure that the diamond industry continues to thrive in India.
Despite the challenges, some in the industry remain optimistic. Jewellery exporter Sevanti Shah of Venus Gems believes that buyers in the USA will still purchase diamond-studded jewellery, even if they compromise on the size. Another Surat-based jewellery exporter, Chunibhai Gajera of Laxmi Diamonds, has found success by exploring newer markets, such as the Middle East. The GJEPC is actively working to support the industry, as evidenced by its efforts to engage with the Commerce Ministry. The council has suggested introducing a targeted reimbursement mechanism for the tariffs, applicable from August to December 2025. This type of support could provide much-needed relief to businesses struggling to cope with the additional costs imposed by the tariffs. The diamond industry in Surat is a resilient and adaptable sector. While the tariffs pose a significant challenge, there is also a determination to overcome these difficulties and find new opportunities for growth. The industry has a long history of success and has weathered many challenges in the past. With the right support and strategic planning, the diamond industry in Surat can continue to thrive and remain a major contributor to the Indian economy. The situation requires a collaborative effort from all stakeholders, including the government, industry, and workers, to navigate the challenges and ensure a sustainable future for the diamond industry in Surat. The future of the diamond industry in Surat is uncertain, but it is clear that the industry is facing a major challenge. The tariffs imposed by the US are likely to have a significant impact on the industry, leading to reduced exports, job losses, and other economic difficulties. It is imperative that steps are taken to mitigate the negative effects of the tariffs and support the industry during this difficult period. The diamond industry is a vital component of the Indian economy, and it is crucial that it is protected. The challenges posed by the tariffs require a coordinated and comprehensive response from the government, industry stakeholders, and other relevant parties to ensure that the diamond industry continues to thrive in India. The industry’s ability to adapt and innovate will be crucial to its success in the coming years. The government's support will also be essential in helping the industry overcome the challenges it faces. The future of the diamond industry in Surat depends on the collective efforts of all stakeholders. Only through collaboration and a commitment to innovation can the industry overcome the challenges and continue to thrive in the years to come. The diamond industry is facing a tough situation, but with the right approach, it can emerge stronger and more resilient.